Western primes itself for rebound in lumber market

New president puts 11 quarters of profit down to teamwork

If there's any correlation between Western Forest Products' 11 consecutive fiscal quarters of positive earnings data and the hiring of Don Demens, you're not going to hear it from him.

Western's new president, a 27-year veteran of the coastal forest industry, is more likely to spread any praise or responsibility among the 3,300 Western employees and contractors.

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Reminded of the fact Western chairman and CEO Dominic Gammiero recently singled out Demens as being instrumental in Western's turnaround and in changing the company's culture, Demens brushed off the compliment with a laugh, saying only that he was "excited about playing a part in building the company."

But the fact remains Demens was hired in 2009, the same year Western started its 11-quarter run into positive earnings before interest, taxes, depreciation and amortization (EBITDA). And he has quickly moved around the executive table, from senior vice-president of sales and manufacturing into the role of chief operating officer and now into the president's office.

Demens, who describes his style as "hands-on and engaged," said his tenure will be about the company and cultivating "team success."

"It's a team effort to deliver a globally competitive, sustainable forest company on the coast," he said. "That's what we are driving for - sustainable for the environment, for shareholders and employees - and if we are sustainable for employees we will be sustainable for the communities we work in."

But that's easier said than done.

The coastal forest industry and Western, having weathered the storms of unsustainable production costs, over-regulation, obsolete mills, a lack of investment and the softwood lumber dispute with the U.S. over more than a decade, started to see some light at the end of the tunnel just before the global economic meltdown in 2008.

"Things were looking better, but then it got dark," said Rick Jeffrey, president of the Coast Forest Products Association, noting the global markets for coastal wood have remained tepid at best since 2008.

"It's not great, but it's better than it was two years ago. It's choppy and even among the players, some guys are doing better than others. There are signs the U.S. will continue to churn along and start to improve and China will resume growth at some point, so it's not so bad."

Against that lukewarm backdrop, Western hopes to continue on its course of profitability. The company reported a $10-million profit on total revenue of $253 million in the second quarter this year and EBITDA of $20.4 million.

Demens maintains the company has set the table for success by reducing its costs, matching production to the markets and managing inventory levels, selling off non-core assets and focusing on margin and value.

"We have successfully repositioned the company," he said, noting that has been done despite weak lumber markets and poor global demand.

"The company that has come out of the recession is significantly stronger than the one than the one that went in."

Demens noted Western's net debt was $127 million in 2009 while at the second quarter of 2012 that number was $30 million.

And the company has committed $200 million over three years to a capital plan to help ensure longterm success.

Of that money, $75 million will be spent on an ongoing basis at its 10 operations (eight sawmills and two remanufacturing plants), with the remaining $125 million targeted to improve mills.

To date, the company has spent almost $24 million, including $8 million at its Alberni Pacific mill and about $16 million at its Saltaire sawmill.

"We are excited about the future, and we have started to build a track record of success financially and that's really important - when you build that track record it provides confidence for people to invest," Demens said, noting that provides stability for the company.

That will be good news when markets start to improve.

And Demens said the company is poised to react when that happens.

"We have a flexible operating platform that can make different products at any one of our mills," he said, adding they have targeted investment in their mills to maintain that flexibility in order to go after the highest-margin products.

"When the U.S. market comes back, and we believe it's a when not an if, and the margins are at the right level for us and attract our volume, we will be able to support the market - we have the ability to go back and forth to different markets where we are directed by margin," he said. aduffy@timescolonist.com

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