Paper Giant Unwraps Plan

Top quality paper products company takes advantage of China’s growing paper demand


By FAN NING

To ensure its leading position in the Chinese market, Stora Enso, one of the world’s leading forest products companies, recently took the plunge and reinvested 38 million euros into the Stora Enso Suzhou Paper Co. This came about on the heels of a previous $240 million injection to upgrade its art printing paper machinery using the most advanced technology available, to improve its paper cutting capacity.

THE BOSS: Stora Enso Suzhou General Manager Jukka Kantola
THE MODERN Touch: Workshop of the Stora Enso Suzhou Paper Co. Ltd. features state of the art technology
Stora Enso is one of the world’s largest forest product companies with an annual output of 15 million tons of paper and paperboard and annual sales volume of 12.8 billion euros. Listed by Fortune as one of the world’s top 500 companies, it has 42,500 employees in 40 countries. It has been listed on stock exchanges of Helsinki, Stockholm and New York.

The project is expected to wrap up in September 2005, when the company’s annual output of high-grade art printing paper will reach 240,000 tons.

Established in 1991, the Stora Enso Suzhou Paper Co. Ltd., located in the Suzhou Hi-tech Development Zone, is the first business in China producing high-grade art printing paper. In 1993, the Hong Kong Purple Charta joined the company. Due to a variety of reasons the company experienced a string of poor performances, spending time as one of Suzhou’s industrial losers.

In June 1998, Sweden’s Stora acquired a 61 percent holding of Stora Enso Suzhou and in December that year, Stora linked up with Enso, a Finnish papermaking group, to establish Stora Enso, which increased its holding on the Stora Enso Suzhou Paper Co. Ltd. to 81 percent in October 2001. It wasn’t long after that the company quickly recovered and turned the corner to profitability.

The key for foreign-funded companies to succeed lies in a combination of the advanced foreign operational mode, which includes advanced managerial expertise, technology and equipment, with their adaptation to local conditions. The Stora Enso Suzhou Paper Co. is such an example.

A Share of the Market

“The huge market potential attracted us to enter China, because at the time when we purchased the Stora Enso Suzhou Paper Co. the Chinese economy was soaring, and so was paper consumption,” said Jukka Kantola, General Manager of the Stora Enso Suzhou Paper Co. Jiangsu Province is a first-grade location for investment, as there are abundant raw materials and auxiliary equipment suppliers, Kantola noted. Good transport facilities provide convenience for production and operations. “The year we came here, there were few high-grade art printing paper mills in China, so our timing was good,” he said.

Seeking maximum profit is the most important rule of investment and it was applied with good effect with the Stora Enso purchasing of the Suzhou Paper Mill. A rich raw material purchasing base and huge market demands made this investment a sure fire winner.

Turning the Corner

After acquiring the majority stake of the paper company, Stora Enso started to engage in the development, production and marketing of art printing paper. In 1999, its annual output hit 103,800 tons, with the annual output and sales volume growing by 60.49 percent and 52.81 percent respectively over the previous year. From the fourth quarter of 2000, it started to turn its losses to profits.

Thanks to its strict quality control the company has passed the IS09001 authentication of quality management system and IS014001 authentication for environment management system. At present, it is applying for OHSAS18001 authentication for occupation health and safety. The quality of their SPCO brand double-coating art printing paper is rated higher than the national standard, enjoying a good reputation in the market.

Through tapping potentials and using Stora Enso’s strong purchasing network, the Stora Enso Suzhou Paper Co. gradually reduced its production costs. From the fourth quarter of 2000, its monthly sales volume and profit increased remarkably. By 2003, its annual production capacity of the art printing paper had reached 167,000 tons, making up 7 percent of the total domestic market. The company has set up sales offices in Hong Kong, Beijing, Shanghai and Zhengzhou among other cities. In addition, it provides excellent after-sale services.

More Investment

In 2003, China became the world’s second largest paper product consumer after the United States, and its paper industry boasts the third largest sector in terms of using foreign exchange, following oil and steel sectors. It is predicted that the consumption of art printing paper in China will grow at an annual rate of 6 percent over the next few years. Stora Enso aims to become the top forest paper industry supplier in the world, using its Suzhou company as an important base to realize this goal. “The Suzhou company is Stora Enso’s biggest plant in the Asia-Pacific region and the group is evaluating its development prospects in the Chinese market,” said Kantola frankly.

Stora Enso Suzhou Paper Co. Ltd.

“Stora Enso pays due attention to the efficiency-oriented development in China. Its 38 million euro investment project aims to expand the product scale of the Stora Enso Suzhou Paper Co., and make its annual output reach 240,000 tons,” said Kantola confidently.

Young and handsome Kantola, a native of Finland, has been general manager of the Stora Enso Suzhou since November 2003, his first visit to China. Before coming to China, he had worked in Germany for a short time. Although the culture and lifestyle in China and Finland are vastly different, Kantola said the enterprise operation and management is similar. “Stora Enso’s managers respect the difference of the two cultures and try to adapt to the traditional Chinese culture and practice localization management in the paper plant,” he said.

Kantola disclosed that the Stora Enso Suzhou has 670 employees, only three of whom were foreigners—two Finnish and one Swedish. Some 30 percent of the employees have college education and the average age is 37. More than 200 senior employees were sent to Finland and other countries to take part in the technical training for the Stora Enso’s projects.

Good Relationships

Kantola speaks highly of the local government. “The investment environment in Jiangsu Province is very good, and the Stora Enso Suzhou has always cooperated well with the local government. We understand each other and communicate frankly, so our cooperation is very pleasant. The government has offered us great support,” he said.

Kantola commented that compared with Finland, China’s local governments pay more attention to attracting foreign capital and are more amenable to foreign businesses. They are willing to help investors and support their development in China, he said. For example, local governments are very active in promoting foreign businesses and improving the investment environment.

“Government’s work efficiency and open dialogue between the two sides are important factors for foreign-funded enterprises to succeed,” added Kantola.

“In 1988, compared with Japan, America and European countries, China had a cost advantage, which has been maintained until the present day. But the cost and sale price are related. The price of goods produced in China is indeed lower than that of America and European countries, and the price of the art printing paper made by the Stora Enso Suzhou mill is also lower than these countries,” noted Kantola.

He stressed that cost is an important factor to influence foreign investment, but not the only factor. “It is the goal of foreign investors to establish a presence in China. So, we should consider various kinds of factors in a comprehensive way,” stressed Kantola, who believes the expansion of Suzhou City along with its improved infrastructure augers well for his company’s future.

Finland is known for some of the most enchanting scenery in the world. Kantola believes that the Chinese local governments should learn from developed countries’ experience in environmental protection, while developing their economy. In this regard Kantola is proud of Stora Enso’s sustainable development principle and its imported advanced wastewater disposal equipment.

In Love With Suzhou

Coming from a country of ice and snow, Kantola soon fell in love with Suzhou. “Suzhou’s climate is warmer than in Finland,” he said. In January 2004, his wife and three children moved to the city. Two of the children study in Suzhou’s Singapore International Primary School, studying English and Chinese. When coming home, they are little teachers. “They teach me and my wife to speak Chinese when they are back home,” said a happy Kantola. “China is well-known for its high educational levels, so I feel at ease that my children are being educated here,” he added.