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Discovery Reports

Domtar boosts mainland's pulp and paper industry

Discovery Reports

PUBLISHED : Thursday, 04 October, 2012, 5:10pm
UPDATED : Thursday, 04 October, 2012, 5:11pm

One of the drivers of the mainland's 12th five-year plan is the transformation and modernisation of its pulp and paper industry. Reflecting rapid growth, the gross industrial output of the mainland's paper industry last year totalled HK$849.37 billion, a 13.2 per cent increase from the previous year.

Domtar recognises that sustainability is pivotal in securing the future of the mainland's pulp and paper industry. Seizing the opportunity to play a role, Domtar is expanding its presence on the mainland with the opening of its paper converting and distribution facility in Guangzhou. This move puts Domtar closer to the market in an effort to contribute to balancing economic, environmental and social concerns in the paper industry.

"To build a good China business, we need to have presence there. It is about building a team of local people to help us respond faster to market opportunities," says Patrick Loulou, senior vice-president for corporate development.

Domtar is engaged in the manufacturing, marketing and distribution of a wide variety of fibre-based products: communication papers, speciality and packaging papers, paper-grade and speciality pulp and adult incontinence products. Through a series of strategic acquisitions, Domtar has become one of the largest uncoated fine paper and pulp producers in the world.

Before opening the Guangzhou facility, Domtar was servicing the mainland market through its Hong Kong representative office. The new paper converting and distribution facility allows Domtar to serve the market directly and foster stronger ties with customers.

"Working closely with our customers enables us to help them maximise the productivity of their manufacturing processes. We are a supply chain partner rather than just a supplier," Loulou says.

Approximately 78 per cent of Domtar's paper production capacity is in the United States and 22 per cent in Canada. Domtar provides the mainland with materials, including Lighthouse pulp, from two mills: the Plymouth, North Carolina, mill that is focused on fluff pulp for adult diapers, and the Kamloops, British Columbia, mill that produces softwood pulp.

With 12 pulp mills, Domtar produces 4.3 million metric tonnes of softwood, fluff and hardwood pulp to manufacture paper and consumer products. The majority of Domtar's pulp is internally consumed for paper manufacturing, while the remaining pulp is sold in the market.

Domtar is one of the world's major producers of market kraft pulp. The company manufactures different pulp grades for a variety of applications.

"The abundant resources that we have access to here in Canada give us an advantage in the market," Loulou says. "For example, northern softwood is a fibre that possesses very desirable attributes for tissue manufacturers. We have a very large China business working with leading toilet and facial tissue producers. It puts us in a good position to sell to the Chinese market."

With a full Chinese staff on board in its Guangzhou office, Domtar can explore new opportunities in other types of paper and pulp products.

Sustainability is a crucial framework in Domtar's operations. Hoping to share this philosophy of sustainability to its clients, Domtar launched an environmental tool to help businesses gauge the environmental impact of their paper usage - the Domtar Paper Trail. This innovative tool earned Domtar the Environmental Strategy of the Year award at the 2011 Pulp and Paper International Awards.

Generating new business streams is a crucial part of Domtar's growth strategy. Domtar's acquisition of the Attends brand of adult incontinence products (diapers) is expected to boost the company's growth. Domtar is one of the leading suppliers of incontinence products sold in North American hospitals and nursing homes. The company sees organic growth and new sales channels as future drivers of this segment.

Venturing to the incontinence products business is a step towards building a successful personal care business. Tapping new business lines will bring the company closer to its goal of generating an additional HK$2.33 billion to HK$3.88 billion of pre-tax earnings within five years.

Domtar sees that working with Chinese companies is instrumental to becoming a significant global player in fibre innovation, particularly in the adult incontinence sector.

"As a major source of our revenues, the mainland is a very important market for us. The new office is only the beginning and we look forward to engaging the Chinese business community even more. This will give us the opportunity to capitalise on the mainland's tremendous growth and market size," Loulou says.