by John Henry on Monday, Dec. 21, 2009 12:00 am
Aubra Anthony, president and CEO of Anthony Forest Products Co., says, "We began making adjustments earlier than most did."
At a time when forest products companies are continuing to close mills and lay off thousands or workers across the country, the foresight of Aubra Anthony has kept Anthony Forest Products Co. humming along.
The El Dorado family-owned company has not shut down a single plant. It has shrunk its payroll through attrition, not layoffs.
All of that is made all the more remarkable considering the forest products industry has been in a depression for almost four years - long before the December 2007 start of the general recession.
Anthony, president and CEO of the company, which sells mostly to wholesalers, said he got his first clue about the coming hard times in the spring of 2006 when he learned that housing sales had dropped 30 percent in one month - from April to May - in markets that had been leading the boom.
"We began making adjustments earlier than most did," Anthony said. He said the company had curtailed production and cut shifts to adjust production to market demand and adjust costs to income.
As a result, all through the long recession, the company remained profitable into August 2008, Anthony said, and has since seen ups and down but is looking to finish its fiscal year in the black. Sales year over year, he said, are down 18 percent.
Anthony recently told company stockholders that he is "seeing shadows" - not a bright light - ahead. "Lumber is simply bumping along the bottom right now. Housing is still woefully impaired," he said.
In the timber business, when a down cycle hits, Anthony said, companies normally have a high-priced inventory and they have to eat the cost on the back end. When timber prices eventually fall, companies can make a profit on the front end. "But we haven't had that uptick yet. The reality is that there is no bounce. Everything is worth less now than it used to be," Anthony said.
Random Lengths, the weekly report on the North American Forest Products Markets, said recently that the softwood lumber industry had permanently shed some 10.3 billion board feet of production capacity over the past three years. That's based on the permanent closing of 122 sawmills since January 2007. Those figures don't include those mills that have been temporarily or indefinitely shuttered or those operating at reduced capacity.
At its peak in 2005, 74.9 billion board feet were produced by the softwood lumber industry. This year, production is on track to finish the year at 38 billion to 39 billion board feet, according to Random Lengths.
Lumber demand this year has hit its lowest level in years, and any recovery in 2010 is expected to be slow at best. Industry analysts aren't expecting any real recovery until 2011 or 2012.
At the peak, there were 627 permits for forest products operations in the state, according to the Arkansas Forestry Commission. As of Nov. 23, 240 of those had been permanently closed while another 59 are inactive, awaiting better times.
Ten years ago, the forest industry in Arkansas employed some 45,000 workers, said Matthew Pelkki, professor at the School of Forest Resources at the University of Arkansas at Monticello. By the end of 2008, the number had dropped to just more than 33,000, he said, and the jobs of probably another 5,000 workers are on hold as their plants are temporarily idled.
"If you survive, you win," Anthony said.
Last month, Anthony Forest Products joined a trend of the major companies in selling all of its timberland.
The company owned 91,360 acres (50,000 acres in Arkansas), which it sold for $173.15 million (about $1,895 an acre) to Molpus Woodlands Group of Jackson, Miss., a timberland investment management organization.
The deal includes a long-term timber supply agreement for Anthony Forest to keep its mills at Urbana (Union County); Atlanta, Texas; and Plain Dealing, La., operational. Anthony manufactures lumber and engineered wood products for the building industry, as well as wood chips for the paper industry.
The deal was very tax efficient for the company and the stockholders, Anthony said. While the sale of the timberland was primarily to provide liquidity for estate planning, he said, it also allowed the company to pay off all debt and gives it working capital for investment.
Most of the employment numbers at the state's largest forest products companies are down some this year, although not as much as might be expected given the prolonged recession.
Pelkki said many of the closings were among the smaller operators. Production capacity, he estimated, is still at between two-thirds and three-quarters of normal, and 25 percent of the jobs lost - primarily those in the sawmill and logging sectors - will be permanent.
According to the 2009 Economic Impact of Arkansas Agriculture report, produced by the University of Arkansas, the state ranks fifth in the nation in the production of softwood lumber. The value-added impact of the forestry sector is $2.83 billion, the report said.
Georgia-Pacific LLC, which earlier this month permanently closed its plywood plant at Fordyce, putting 346 workers out of a job, remains the largest operation in the state with more than 2,100 workers, mostly in south Arkansas.
Only two other companies, Evergreen Packaging Group and Domtar Corp., now have more than 1,000 employees in Arkansas. Evergreen has the old International Paper Co. paper mill and chip mill at Pine Bluff, and Domtar has a fine-paper plant at Ashdown.
Weyerhaeuser, the second-largest timberland owner in the state behind Plum Creek Timber Co., comes in fourth with 780 employees at its five locations. The industry giant last week said it would convert to a real estate investment trust (same as Plum Creek) next year to boost profitability and reduce taxes in its timberlands business.
Aubra Anthony's Influence on Wood Industry Is Great
It's safe to say that few - whether in Arkansas or in the United States, representing a small company or a large corporation - have had a greater impact on the forest products industry than has Aubra Anthony, president and CEO of Anthony Forest Products Co. at El Dorado.
With a law degree from the University of Virginia, vast political connections built up over the years, as well as connections within the industry through his participation in various industry organizations and associations, he has gained a wealth of knowledge that has served him, his company and the industry well.
Anthony served as chairman of the American Forest & Paper Association, a national trade group, from 2004-06, an unusual position for someone from a relatively small company. He remains a director of the group.
Anthony Forest Products reported revenue of $131.4 million for 2008 and had 315 employees, including its operations in Texas, Georgia and Canada. Anthony Forest Products and Domtar Inc. of Montreal jointly own and operate an I-joist manufacturing plant in Sault Ste. Marie, Ontario.
Anthony has worked with Arkansas' legislative and congressional leaders to help develop policies to bolster the industry. Earlier this year, he was appointed to a nine-year term on the board of the Arkansas Forestry Commission.
Not only has Anthony been a leader in fighting to make wood building products eligible under new green building standards through the Green Building Initiative's Green Globes program, but he also is a representative of forestry on the Arkansas Governor's Commission on Global Warming.
Anthony has long been active in environmental issues and seeks to find opportunities for the industry in the climate change debate, but he is critical of what he calls the "environmental Taliban." Before it was sold, all of the company's timberland was certified by the Sustainable Forestry Initiative.
He's proud of the North American Wholesale Lumber Association's Mulrooney Award, given earlier this year for his "significant contribution to the forest products industry."
The company's safety record is one of the best in the nation. Its engineered wood business won the APA-the Engineered Wood Association award for safety this year, and the company's safety records at its six plants have all qualified for OSHA's Safety & Health Achievement Recognition Program, which recognizes employers who operate an exemplary safety and health management system and exempts those work sites from programmed inspections by the Occupational Safety & Health Administration.
"Aubra has been a forward-thinking voice for the industry in Arkansas," said Max Braswell, executive vice president of the Arkansas Forestry Association. "He was instrumental in bringing the wood in school construction issue to the forefront." That initiative has now been adopted by other states. Anthony said the new 318,000-SF El Dorado High School under construction will save more than $6 million by using wood framing rather than steel.
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