What's on the menu
for 2009?
Tissue
World asked Nestor
de Castro, Voith Paper President - South America, for his views
on the year ahead
Tissue World: What impact will the
global financial/economic upheaval have
on the tissue
business - demand
for tissue, company
profitability, M&A etc?
Nestor de Castro: Tissue is one of the few paper businesses
expected to continue growing over the next year as it is not
only based on GDP development but also on population growth.
However, this growth is going to happen in a lesser extent than
seen until mid 2008 due to the upcoming recession.
Decreasing consumer purchase power will put pressure on tissue
prices. But prices for commodities like pulp, oil (chemicals)
and energy prices are going down as well so that decreasing production
costs might allow equal or even higher profitability of tissue
products. To prevent consumer price awareness leading to lower-quality
products, producers will have to concentrate on cost efficient
quality tissue production technologies like ATMOS or TissueFlex.
Tissue producers with high debts will face higher financing costs
due to less credit availability and higher interest rates which
will impact business results negatively.
There is a high chance of further concentration in the tissue
industry by mergers and acquisitions, to be more prepared to
face the global economy crisis.
TW: How will this affect capital investment, including projects
that are already decided/financed and those in the planning stage?
de Castro: We expect some delays of projects that are in the
planning phase. The duration of the delay will be directly related
to the speed of recovery of the global economies. While large
tissue producers might put their expansion plans on hold independent
entrepreneurs and family owned companies could see the situation
as an opportunity to make investments for faster payback and
stronger growth.
TW: For the machinery suppliers, what will be the impact of
the above?
de Castro: For sure, it will have an impact for the machine
suppliers but, it will take longer for us to really feel it due
to our good order back log. Also, the reduction of commodities
cost and sub supplier pricing will reduce the costs of our products.
TW: How long do you expect the difficulties to last?
de Castro: This is the one million dollar question! If we have
already reached the lowest point of the crisis and governments
make the right moves over the next months, then recovery can
be fast, like in about one year. If we are still on our way into
the eye of the storm, then recovery will be flatter and can take
up to 2-3 years. Naturally, we have to be optimistic.
TW: Any other comments?
de Castro: As commented on Question 1, we believe that tissue
business will be less affected than other paper business and
industry segments. Tissue profit margins will be under price
pressure from one side but might see relief on the cost side.
China will continue to play an important role as they are one
of the largest exporters and importers of the world. If they
continue with solid growth (more than 8%/year), this will help
developing and developed countries to face the economy difficulties.
TW: Mr de Castro, thank you! TW
