John D. Williams is a busy man. A self-described 'deeply frustrated golfer' an avid reader and committed to a regimen of regular walks through the countryside for fitness, the UK native has been at the helm of one of North America's most profitable pulp and paper companies since 2009.
Appointed CEO of Domtar three and a half years ago, Williams continues to bring his unflappable energy and enthusiasm to the job, and has positioned Domtar ahead of the curve in a challenging industry in the process. His keen sense of what consumers want is clearly and consistently reflected in the company's creative branding and marketing and the proof of his commitment to the industry is reflected in the numbers: while Canadian mills continue to close shop and quarterly reports of his competitors nosedive, Domtar is managing to stay on top. Williams has proven himself to be the man for the job.
On July 18th Williams sat down in the lobby of the New York hotel he was visiting to engage in a frank discussion with Paperadvance about the forestry sector, Domtar's position, and the company's vision.
Can you tell me a bit about yourself? What is your background? What did you study? Does the paper business run in your family?
Williams: Well, as you can tell from my accent, I am British and I am married, with two children. I majored in English Literature and worked in consumer sales after graduating. The paper business does not run in my family at all, in fact my father was a biology school master!
What news sources do you read? What is the one book you would recommend to someone looking to learn about Canada's pulp and paper sector? The one book you would recommend to your Canadian pulp and paper CEO counterparts?
I am an avid reader, and read a lot of biographies. I am a huge Churchill fan. In terms of news, I read the Wall Street Journal every day, and the Economist magazine every week. I'm also an iPad user. I don't know what book I would recommend to learn about the sector, but if I had to recommend one book to my CEO counterparts, it would be Innovator's Dilemma. It gives excellent insight into how we innovate in order to create long-term sustainability and build new business streams going forward.
What are the key attributes of Domtar? How has the company changed in the last 10-15 years in terms of its response to a constricting market for Canadian pulp and paper products?
Williams: Well, it is a very different business from the conglomerate Domtar used to be. The original company was founded in England in 1848. Beginning of the 19th century, it became Dominion Tar and Chemical Company and set up shop in Canada in 1903. Fast forward several decades, it merged with Weyerhaeuser's fine paper business in March of 2007 and that event really marked the start of what we now refer to as the New Domtar. I came to the helm as CEO in January 2009, at the peak of the worst recession any of us has ever seen. Talk about timing! The company had a very high debt load in January of 2009, our net debt-to-capitalization was a little over 50%.We had a number of non-core businesses and stranded assets. Since then we have reduced our debt by over $1.2 billion, managed to reinstate the dividend, announced a share buyback program that we subsequently raised to $1 billion and we've sold a number of money losing businesses. Our focus has been on three things 1) the customer 2) cost-effectiveness and 3) cash-generation. We are making and keeping promises to our shareholders. We're getting rid of old mills. We're trying to clear our historic assets that have no value. Our goal is to transition the company from a traditional pulp and paper company to be the leader in innovating fiber-based products, technologies and services.
Domtar operates the following business segments: Pulp and Paper, Distribution and Personal Care. The company had revenues of $5.6 billion in 2011, of which approximately 85% was from the Pulp and Paper segment, approximately 14% was from the Distribution segment and approximately 1% was from the Personal Care segment.
What do you consider to be Domtar's key challenges going forward? How has the high value of the Canadian dollar, declining returns on investments, the strengthening of competitor markets and industry regulation impacted the company?
Williams: Certainly there are challenges. The Canadian dollar is perhaps the biggest of those challenges. But that said, it is an environment we have been working within for some time, and Canadian prices are at a point where the Canadian dollar isn't hurting us as much.
It's a difficult market. There is a 3-4% annual decline in this industry and so you have to find other things to do with the pulp you produce and find an alternative use for some of your fiber converting assets. You have to 'build out.'
Can you discuss the ways in which Domtar has changed its focus and begun to specialize in niche markets, such as personal care?
Williams: We have found tremendous value in the adult incontinence market; it's an industry that brings in $8B globally every year. We have about $425M per year in sales in this market, and our objective is to grow this and double the business over five years.
Domtar seems to have cultivated a brand that communicates concern for, and responsible stewardship of, the environment. How critical has that positioning been to Domtar's success?
Williams: I believe that sustainability is about behaviour. It isn't just a proxy for environmental stewardship, but the sustainability or your entire enterprise. Marketing environmental sustainability at the front-end of your business is wrong – you need to behave sustainably and then explain to the world what you've done. Domtar behaves in environmentally-sustainable ways and this is reflected in our Earth Choice brands and the fact that we are FSC certified. Behaving in these ways allows you to tell the story. You have to do the right thing. If you don't, you will be correctly punished.
Pulp and Paper
How important is marketing for your company?
Williams: It's becoming increasingly important. We have worked to reposition our company with a number of initiatives like the Paper Because campaign and The Paper Trail that communicate our responsible use of paper, and allows the consumer to make responsible paper choices, and to feel good about them.
Does Domtar anticipate making any major capital expenditures in the next five years?
Williams: Our Canadian capital expenditures in the next five years will be standard. The $143.5M from the Green Transformation Project has been spent and that was very effective. We expected normalized capital expenditures. Nothing out of the ordinary in the next ten years.
How do you deal with resistance from investors when looking to embark on a new initiative? How about media stories that cast the pulp and paper industry in a difficult light?
Williams: You have to build a business that simultaneously supports the long-term and focuses on Quarter-to-Quarter. Your earnings will fluctuate, but if you're doing things that please your investors and if you continue to do these things, they will support you. We have worked very hard to do these things. It isn't to say that challenges don't come up, but we remain consistent and we tell our story. You need to explain your challenges, you need to communicate how you will respond to those challenges and you need to do what you said you were going to do. You need to operate on a principle of no surprises. If you don't do this, you can find yourself in a very difficult place!
We've had three acquisitions in the last eight months. With each of these we still managed to increase our dividend. When you follow through like this, your investors will be with you. If you do something weird, they will punish you.
How important is Research & Development? Recruitment?
Williams: We're much more D than R. We have membership through FPInnovations and partnerships with universities. This allows us to take tested ideas to the market. You need to kiss a few frogs before a prince turns up, and 90% of all products fail within five years of going to market. You need to know when to stop – that is just as important as having a good idea.
We don't really have an issue with recruitment. At a local level it can be difficult to find specialized engineers in isolated areas, but we operate on a principle of 'growing our own' and this helps us adapt as requirements change.
If you had to summarize your 'vision' for the company, how would you do this?
Williams: We operate in small communities, but we have to be globally competitive. You always need to stay focused on remaining competitive. You need to innovate and we are constantly researching new markets for our products. This industry has been incredibly challenging for years. But it's an investable industry. We focus on three basic principles; agility - so that we remain strategic and aware of what's coming, caring - an emphasis on the sustainability and HR side of our business, and innovation – looking for new business.
Domtar sells a combination of branded (Attends®) and private label briefs, protective underwear, underpads, pads and washcloths.
In 1988, he became European Managing Director of Sweetheart International, a major food packaging and food service business, where he cultivated a customer-driven market view and contributed to record profit and sales growth. In 1992, the company was acquired by the Finnish conglomerate, Huhtamaki. Mr. Williams was appointed Chief Executive Officer and Group President of the packaging business (Polarcup), one of the company's core divisions.
Mr. Williams' experience in the packaging sector continued to grow at Rexam, the world's second largest consumer packaging group. There, he held a number of senior management roles in specialty food packaging from 1996 to 2000.
His professional journey then took him to SCA Packaging, a business group of the global consumer goods and paper giant, SCA. As President of SCA Packaging Europe from 2005 to 2008, Mr. Williams helped transform the company from an undifferentiated manufacturer into a market-driven, customer-oriented packaging solutions provider.
Mr. Williams is a member of the Board of Directors of Owens Corning (NYSE: OC), FPInnovations and Chairman of the Board of the Montreal Chamber Orchestra. He is also a director of the American Forest & Paper Association. In 2010, he was named North American CEO of the Year as well as Global CEO of the Year by RISI, the leading information provider for the global forest products industry.
Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets and distributes a wide variety of fiber-based products including communication papers, specialty and packaging papers and adult incontinence products. The foundation of its business is a network of world class wood fiber converting assets that produce papergrade, fluff and specialty pulps. The majority of its pulp production is consumed internally to manufacture paper and consumer products. Domtar is the largest integrated marketer of uncoated freesheet paper in North America with recognized brands such as Cougar®, Lynx® Opaque Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice®. Domtar is also a leading marketer and producer of a complete line of incontinence care products marketed primarily under the Attends® brand name. Domtar owns and operates ArivaTM, an extensive network of strategically located paper and printing supplies distribution facilities. In 2011, Domtar had sales of US$5.6 billion from nearly 50 countries. The Company employs approximately 9,100 people. To learn more, visit www.domtar.com.