Franz J. Marx, CEO of Ilim Group, delivered a presentation at the opening of the 19th Annual Adam Smith Conference. Pulp and Paper in Russia and the CIS which is taking place in Vienna, Austria.
In his presentation on key challenges for long-term competitiveness of the Russian pulp and paper industry, Ilim’s CEO outlined the company’s vision of the industry development outlook, spoke about Ilim’s development strategy and government support the pulp and paper industry needs. According to Ilim’s CEO, the worldwide demand for paper and board is expected to grow up to 7% or 27 million tons by 2020 while the emerging countries, including China, Eastern Europe, Latin America, and Russia which has already secured a strong position in the target growing markets, will set the pace. Notwithstanding the difficult economic situation in Russia, Ilim Group can see opportunities for further development of the Russian pulp and paper industry and expects that the annual growth of consumption and demand will gradually achieve 1.5%.
The company completed implementation of the large-scale investment program and is now starting to put in place its sustainable development strategy which rests on the following three pillars: growth (full ramp-up of the investment projects in Bratsk and Koryazhma and debottlenecking at all locations), active cost management (adoption of world best practices in manufacturing excellence and operational efficiency, continuous non-price improvement, improvement of equipment reliability) and, finally, organizational efficiency (customer-focused organization, optimized procedures, and headquarter organization).
Franz J. Marx also spoke about the current status of the investment projects, “The current capacity of the new fiberline in Bratsk is 85% of CIP, while the mill managed to reach the overall target production capacity already in October owing to the decision to retain the KLB line. It was a well-calculated decision to continue the production of kraftliner which is in high demand in the market. We also proceed with implementation of a number of small projects for further debottlenecking and consider opportunities for further increase of production output”. Ilim’s actual production volume has already exceeded 100% of the production plan in Koryazhma where Ilim produces coated paper under the Omela brand while all of its cut-size grades were successfully qualified, including Russia’s only premium A+ grade cut-size. “Today our key focus is on increasing OME, reducing costs, and improving product quality. Our initial goal was to manufacture a world-class quality product and we succeeded in doing so”, said Franz J. Marx, Ilim’s CEO.
He also pointed out that we still have to face key issues and challenges of the pulp and paper industry, including inadequate development of transportation infrastructure, terms for extension of long-term timberland lease for bona fide lessees, increase of transportation cost exceeding the inflation rate.
Government support efforts which might facilitate competitive development of the pulp and paper industry in the long run should be aimed at improving availability of long-term financing, reducing tax burden associated with investment project implementation, providing support for infrastructure development, including via public-private partnerships, putting in place intensive forest management practices and providing support for pulp and paper R&D activities.