Ahlstrom-Munksjö invests, adapts in response to decor market changes

2018 was an eventful year for the decor paper business in general and Ahlstrom-Munksjö in particular. To assess what happened and what lies ahead, Surface & Panel posed a series of questions to Tomas Wulkan, executive vice president, decor, at Ahlstrom-Munksjö, a global leader in fiber-based materials. Ahlstrom-Munksjö’s products include decor paper, filter media, release liners, abrasive backings, nonwovens, electrotechnical paper, glass fiber materials, food packaging and labeling tape, medical fiber materials and solutions for diagnostics. The company is based in Helsinki, Finland.

Here are S&P’s questions and Wulkan’s responses:

Q. After a year of leading Ahlstrom-Munksjö’s decor business, what are your key priorities and have you restructured or made new appointments to better pursue your business strategy?

A. As an introduction, I would like to give you a few words about my career path. I started with Ahlstrom-Munksjö as executive vice president of the decor business area and member of our group’s executive management team in January 2018. I am a Swedish citizen but have lived abroad for more than 20 years (Germany, U.S. and Turkey). I am now living in Ulm, Germany, close to our sales and marketing head office with my wife and our two youngest children. My professional career has mainly been with the Swedish paper and hygiene company SCA/Essity. The first 10 years were in finance positions, and the last 15 years were as general manager for different business areas, providing me a sound foundation for the challenge to lead the decor business of Ahlstrom-Munksjö.

With regards to priorities for our business, during the spring of 2018, we made a thorough market review to ensure that we are addressing the most important and attractive market opportunities while keeping our valued customers at the forefront of our business. At the same time, we reviewed our organization and developed a strategic plan to achieve these goals. Our new “Imagine Decor” strategy builds upon our strengths but also addresses our most important future challenges.

While we already had a strong and well-respected team in place, I have started to adapt our organization to address areas of need and enhance our offer to the market. For instance, to optimize our supply chain and to implement our best practices across all our decor paper plants, Michael Schirle, former plant manager in Unterkochen, has been appointed VP technology and engineering with responsibility now for all our decor paper plants. To bring our innovation capabilities closer to our customers and their end-user requirements, we have also changed our R&D set-up. Our aim is to bundle our technical customer service and innovation resources, utilizing our state-of-the art R&D facilities and team to further improve our technical support to our customers and remain their preferred innovation partner. We were also happy to have industry veteran Thomas Gehring join Ahlstrom-Munksjö in 2018 as plant manager in Dettingen, with the objective to implement several top priority actions for the mill:

• Further enhance Dettingen’s leading position in the pre-impregnated paper market segment.
• Improve the cost competitiveness of the Dettingen plant.

Finally, I have also done some finetuning to our sales organization to further streamline and strengthen our ability to serve our customers. I am confident we are now well positioned to take on the challenges of our strategic plan and serve our customers, shareholders and employees to the best of our ability.

Q. Ahlstrom-Munksjö recently acquired U.S. specialty paper producer Expera Specialty Solutions and the MD Papeis Caieiras plant in Brazil. What are the synergies and benefits of those purchases for your decor business?

A. Expera has now been integrated into our group as a separate business unit named North America Specialty Solutions (NASS). This acquisition was primarily made for other reasons than decor paper. However, it could be considered to rebuild an existing NASS paper machine for decor paper production, which could allow us to better serve our North American customers. That said, this is not a short-term priority but is something we will evaluate in the future. For now, we will at least take advantage of any synergies and opportunities our new platform in North America provides us.

On the other hand, the MD Papeis acquisition was primarily made for decor paper purposes. With Caieiras now being part of Ahlstrom-Munksjö, we have a strong base to serve our customers across South America. Our acquisition has also been well received by customers. During the coming months, we will define a strategic action plan based on input from our customers to better serve this region. As part of that program, some investments will be made to ensure that we can meet the quality expectations of our customers.

These are exciting times at Ahlstrom-Munksjö as we grow and are able to better serve our customers in all regions of the world. To this aim, another short-term focus of Ahlstrom-Munksjö Decor is to define an entry strategy to China, the world’s largest decor paper market, which we plan to address in due time.

Q. After the recent acquisitions, are you still in a position to invest in your existing manufacturing facilities?

A. To ensure our quality leadership and competitiveness, we have already initiated a comprehensive investment program in our existing plants. Recent quality investments in the wet end (sheet-forming) section of our paper machines in Unterkochen, Dettingen and Tolosa form part of this program.

At our Dettingen mill, the quality rebuild of PM 34 has just been successfully completed. This project related to further quality improvement for our décor and pre-impregnated papers, including installation of a new headbox and a completely new approach flow system. The project targets, which included improved sheet formation, better grammage profile control and improved cleanliness, were all met. Production re-started successfully in early January.

We will continue this journey in the coming years and address our remaining production assets, including the Arches paper mill, currently our main platform serving the US decor market. Our investment program will also further limit the environmental impact from our operations and help us to achieve our ambitious sustainability and biodiversity targets.

Q. As one of the leading decor paper manufacturers, how do you assess the American market? What opportunities do you see? What challenges?

A. 2018 was a challenging year as we continued to face steep raw material cost increases, particularly during the first half of the year. After raw material prices seemingly peaked during late summer, we also experienced a highly volatile order inflow impacted by inventory reductions across our industry.

Looking at the different geographies, we faced a slight weakening of demand in our European home markets (including Turkey), while the North American market remained strong throughout the year. 2018 was also another year of strong demand growth in China and adjacent Asian markets.

Globally, we are seeing more and more customer consolidation and/or ownership changes, and we expect this market evolution to continue into the coming year, including in North America. The decor market as a whole is in a transformation process, and we will adapt accordingly. In North America specifically, there are some big panel producers making major investments that will come online soon and continue to change the market dynamics. The European model of integration is having a more important role in this market.

For 2019, we foresee a stable demand in Europe and North America. While we expect order inflow to remain volatile in the beginning of the year, we expect business activity to pick up during the second half of 2019 following Interzum, with new designs and new decor paper products contributing to demand. Beyond then, we certainly can be optimistic about North America specifically due to the already announced investments by our customers. As for China and rest of Asia, we expect this region to become increasingly more competitive for us during the year due to significant capacity additions in decor paper making.

Q. The cost of raw materials for the paper industry increased considerably in 2018. What do you anticipate regarding raw materials in 2019?

A. The size of our group, which as we have discussed continues to grow, certainly helps provide some leverage with our suppliers. We have also tried to mitigate the rising raw material costs through investments to improve production efficiencies and furthering the sharing of best practices among our plants (40 plus across our group).  However, 2018 was difficult for all involved in this industry due to the rapid increase in the cost of raw materials, which we did not fully pass to our customers. For the beginning of the year, we foresee short-term price stabilization for pulp and slight price erosion for TiO₂. The outlook beyond the first quarter is, however, unclear. Rising feedstock prices for TiO_2, as well as the increase in demand that will follow the start of the coating season in the spring, is likely to reverse the price trend again. For pulp, the outlook remains highly uncertain. We will continue to do all we can to support our customers and manage these unpredictable times together.

Q.  What is your approach for bringing innovations to the decor market?

A. Our R&D team, led by Sébastien Charignon, includes a group of engineers with strong expertise in papermaking and a deep insight into the decor market, its end-use requirements and technical thematic. With our new dedicated R&D platform, we have the ambition to be a better partner and to establish a deeper collaboration with our customers on product innovations and breakthrough technologies. Our two R&D centers in the south of France with their advanced scientific equipment give us unique advantages in this innovation work.

Innovation in the area of sustainability forms an important part of our agenda today. It is our ambition to continue to lead the sustainability agenda and be the benchmark in our industry. In 2017, Ahlstrom-Munksjö signed the United Nations Global Compact to show our commitment to people and the planet. We have defined targets in nine prioritized areas:  human rights, community engagement, employee well-being, supply chain, “energy, water and waste,” carbon dioxide, profitability, innovation and business ethics. R&D work to design the next generation of our clean and green formaldehyde-free pre-impregnated MFoil-PN is one important example in this area.

Our innovation in the color segment continues to open new opportunities for designers and also bring additional product functionalities to the surface material. Let’s not forget inkjet, which continues to be an important development area that we pay attention to, but it is not the only one. We will continue to use our vast resources and knowledge along with close cooperation with our customers to be on the cutting edge of the decor market.

Q. Interzum 2019 in Cologne, Germany, is the next key event for the industry. What will you highlight at Interzum?

A. During the 2019 Interzum, we will focus on novelties in pre-impregnated papers for finish foil applications, as well as what’s fresh and trendy in solid colors for the HPL and LPL market segments. Concerning pre-impregnated paper, we will highlight our M-FOIL-PN quality with its environment friendly advantages. For solid colors, it will be the opportunity to introduce our new and exciting color trend collection for 2019/2020.

This new trend collection called TERRA NOSTRA will express the human being tribute paid to Mother Earth and the necessity to take care of our environment. The collection is made of three different color families reflecting three different stages of our universe: At the beginning, our planet was on fire; then, elements and material became solid minerals; finally, nature and life appeared on Earth. It is a proposal made of 40 trendy solid color papers offering to our HPL, LPL and panel producer customers a new source of inspiration. The color palette from TERRA NOSTRA will also confirm several clear trends, such as:

-The gray family is one of the most important color orientations, especially medium grays in matte finishing. It expresses elegance and neutral feelings and can be used universally.

-The green group is another trend, especially the very natural and medium tones, such as army green, lemongrass and grayish greens, while emerald color will bring a touch of sophistication.

-Antique reds, Marsala red and Pompeian red bricks become more and more important, especially for kitchen, living room, shop fittings and hotels but will appear also for offices.

-Finally, black is the key color for the coming season in super matte finish, but also with different kinds of texture and focusing on important anti-fingerprint characteristics.

We look forward to welcoming our customers, suppliers and other industry professionals to our booth. Come visit with us in Hall 6, Booth B20/C21. See you there!