^Improving the paperwork
What's NewS Issue 9 September 1996
spend a day
3
There was a time when the mere mention of the paper sector drew frowns all
round in the bank.The industry was in trouble, and that meant trouble for the
bank. But a new strategy to restore trust in paper has led to careful, selective
involvement in this cyclical sector based on a focused approach to the main
players. Account manager Frans Cuppen spent a day at KNP BT's Zülpich plant,
one of the bank's major paper projects.
Committed to paper
- Frans Cuppen
(second from left
and Flans van
Imhoff (left). They
didn't arrivé empty
handed when they
went to spend a day
with Jan van Elk
(second right) of
KNP BT's Zülpich
recycling plant.
'You may remember we actually got the
Deal of the Month with this particular
project,' Cuppen says, referring to the
recycled paper-board production machine
currently being built at KNP BT's Zülpich
plant in Germany. 'The transaction itself
was quite innovative in that our structured
finance people worked with low after-tax
interest costs and also enhanced on-
balance sheet ratios. But no one from the
bank actually went to Zülpich - there was
^kothing to see at that time, and, of course,
^nnance is a rather abstract exercise.'
along a rather novel corporate gift. 'We
drove down with a truck full of used
paper for recycling,' Cuppen grins.
'Recycling is another of those key
concepts you associate with the paper
industry today. But let me first say
something about other forms of raw
material. In the primary producing
countries, such as Scandinavia, forests are
crops grown specifically for the industry.
In fact, these are sustainable crops and
Scandinavian forests are growing faster
than consumption.'
CONSUMING GROWTH
Although an old hand in the paper
industry, Cuppen was fascinated. He has
seen at least 10 of these machines in
operation. 'The problem with these
machines, and that is why, as a banker,
you have to be very careful about your
involvement, is that they can actually be
bad news for the industry as a whole. I've
said paper is cyclical. One of the reasons is
that the construction of one new machine
can destroy the whole market. This is
because it can produce so much that even
when demand is growing, a single new
machine can consume that growth at
once. And there's another factor here. In
good years for the paper industry, a lot of
companies decide to build a new machine.
They have to invest to stay on top.'
SECTOR STUDY
But Cuppen admits that it is these factors
that have made him like this industry so
much. 'I like it because it's cyclical,' he
grins. 'In many industries, there is steady
growth, steady profit. Paper is so much
more challenging because it is cyclical.
And if you choose to step in on the down
side of the cycle, then you can earn a lot
of money in this sector. But you have to
know it, understand it. The board has
now asked us to prepare a study on the
paper industry so we can teil them more
about its future. We're doing that now.'
Will it be on recycled paper? Cuppen
laughs. 'Well, it certainly won't be on
paper produced from the truck-load we
took down to Zülpich - that turned out to
be the wrong kind for their machines. In
the end, we had to drive it back to
Utrecht.' So, ultimately, like the industry
itself, it came full cycle.
RIGHT PLAYERS
There is nothing abstract about the paper
industry itself; the key word here is
cyclical. 'This is why we are totally
concentrated on working exclusively with
the biggest companies in Europe, like KNP
BT,' Cuppen says. 'There is a struggle
ongoing in the industry, we're seeing a lot
of mergers. The smaller companies will
certainly disappear. Only the majors will
survive. Our task is to ensure that even
though the sector is cyclical, our now
relatively extensive portfolio is safe
because we have selected the right
players.'
SUSTAINABLE CROPS
^NP BT is clearly among these 'right'
players. And this is one reason why
Cuppen and his colleague, Hans van
Imhoff, were more than willing to 'spend a
day' at the Zülpich plant. And they took
CONSUMER DEMAND
According to Cuppen, consumer
behaviour has had a profound effect on
the paper industry. 'Consumers today
demand that paper be made from
sustainable crops and be free of chlorine.
A lot of consumers also prefer recycled
paper. Manufacturers have responded to
this changed behaviour and increased
awareness in a radical way.' Which brings
us neatly to the Zülpich plant. 'When we
went down there, I think we expected a
brief visit. But the people there were really
pleased to see us. They spent four hours
showing us the plant and explaining what
each machine did and how the technical
side worked. One of the amazing things
about the new machine was that we could
actually see all of it and because it wasn't
yet operative, we could actually hear the
explanation of what it will do when it
starts production in September.'
SPEND A DAY-
MEER DAN OUD
PAPIER
Frans Cuppen en Hans
van Imhoff bezochten in het kader van het
'Spend a day'concept de vestiging van hun
klant KNP BT in Zülpich (BRD) om de
nieuwe, door onze bank gefinancierde
papiermachine aan het werk te zien. KNP BT
is een van de grote spelers op de papier-
markt. Deze markt, die zeer cyclisch is, wordt
gekenmerkt door fusies en overnames.
Alleen de grote spelers zullen uiteindelijk
overleven.
Rabobank
