Kronospan shows confidence20 June 2019
Multi-million pound investments at Kronospan’s Chirk site are a vote of confidence in the UK market. Sally Spencer reports
In a world where business is dominated by multi-national, multi-ownership conglomerates, Kronospan is something of a rarity. It may be a global enterprise, with 45 sites across 29 countries and more than 14,000 employees but it is still very much a family business
A sawmill in Lungötz in Austria set the wheels in motion in 1897, followed 62 years later by a particleboard mill in nearby Salzburg. This made good use of the sawmill’s residues and saw Kronospan set out as an early manufacturer of the new particleboard product.
The company exported particleboard to the UK and, seeing the growing market, established a mill in Chirk in 1970. This UK operation was the first non-home country site – but the first of many. Over the subsequent decades the owners drove expansion further and mills in Germany, Poland, the Czech Republic, Slovakia, Hungary, Romania, France, Italy, the US, China and more were spawned.
Worldwide, Kronospan now boasts 23 particleboard production sites, 18 for MDF/ HDF, 10 for OSB, 26 for melamine facing, 11 for laminate flooring (it is the biggest laminate flooring manufacturer in the world and the only UK maker) and five for worktop production. Its capacity across all panel types is a shade under 25 million m3/year.
Kronospan’s global credentials were firmly established by the 2000s but the now fifth generation are still ambitious for further growth and investment and expansion has been non-stop.
For example, from 2008-2012 – the turbulent recession and immediate postrecession period – Kronospan invested €1.3bn in its operations. A further €2bn was invested in the three years to 2016/2017 and another €2bn for the 2018-2020 period. Work at mills across the world map has ranged from commissioning new OSB lines and expanding particleboard capacity to melamine facing and flooring lines – to name just a few. Planned investment includes particleboard and OSB capacity expansion at Riga, Latvia, MDF and melamine faced MDF lines at Kaluga, Russia and an eagerly anticipated OSB line at Chirk.
“The impressive thing about the investment plan is that it is multi-project,” said Julian Shaw, sales manager for the Kronobuild range of products at Chirk (more of which later).
“We are either adding more products to existing sites or enhancing their productivity,” he said. “It is also very much about adding value by using our melamine facing and laminating capabilities. We focus on taking that base product of particleboard, MDF or OSB and adding as much value as we can without competing with our customers.”
One of the drivers for investment in production and, by extension, cost efficiencies has been the “drift” of manufacturing further east, for example to eastern Europe, Russia and China. This geographical shift has been triggered by manufacturers following emerging markets, more competitively priced raw material and cheaper labour and Kronospan’s many investments, including at Chirk, are designed to keep it ahead of the pack.
Other global dynamics are also influencing developments, particularly at the Chirk site. Population growth in western Europe and the UK, partly fuelled by immigration, and the need to increase housing stock has led the company to earmark £300m of the €2bn 2018-2020 investment pot for Chirk, including the new OSB line.
“We clearly see growth in demand over the next 10-15 years,” said Ludwig Scheiblreiter, chief executive officer, adding that investment in the Chirk site was a vote of confidence in the UK market, the site and its employees by Kronospan’s owners.
That investment, already two-thirds through, is impressive by anyone’s standards, particularly over the last couple of years, during which time the 120 acre site has been comprehensively streamlined and futureproofed. Major state-of-the-art production technology has been incorporated in the process.
Change is evident everywhere on the site, from pre-production through to finishing. For example, the raw material is now stored and rotated in new silos, rather than being left outside in the elements and infeed into the plant is now automated – no more trucks trundling through the yard.
Space has been cleared for the anticipated 50m continuous OSB line, which will sit between the two existing MDF lines and particleboard line. The lines will feed automatically into the melamine department, which comprises four presses – three new and one refurbished. This has doubled Chirk’s melamine facing capacity and presses are twice, if not three times faster than their predecessors.
“Our worktop line is also completely new and of our three flooring lines, one is new and two have been completely refurbished,” said Mr Scheiblreiter. “Our old T&G line for P5 has been taken out and replaced with a new line, which is already capable of making particleboard and OSB for flooring.
“We now have two biomass boilers and can supply all the heat we need from our own plant waste,” he continued. “And we have built gas engines so we are autonomous on electricity supply. We have also renewed our infrastructure, for example, our thermal oil system.”
It’s been an intensely busy period but the inevitable disruption has been worth it. The re-routing of thermal pipes and the reverse flow of melamine presses for the layout that were necessary compromises in a 40-year-old organically growing site are a thing of the past and material flow is now seamless.
Bottlenecks have also been consigned to history but it’s not just about speed and volume – quality has been improved too.
“The quality of our melamine facing is better because by being quicker the board isn’t heated up so much and its technical properties are kept intact,” said Mr Scheiblreiter. “We can make deeper structures and this is the trend now – deeper structures that mimic real wood and real veneer, not only how they look but how they feel.”
This capacity for verisimilitude has also paid dividends with laminate flooring production.
“Six or seven years ago laminate flooring was the cheapest floor covering available and everything had moved to a 6-7mm product,” said Mr Scheiblreiter. “Consequent and sustained product development has changed the character of the floor and the market, which had started to shrink at the beginning of the decade has started to grow again.
“It is no longer sold as a cheap floor covering but as an alternative to real or engineered wood and is proof that if you invest in a product and give customers what they want, you can turn it around.”
The aim of the investment and redevelopment of the Chirk site is to double the size of the business, both in terms of turnover and capacity, while keeping to the same head count (currently 650). Chirk’s output is targeted at the UK and Irish markets.
Figures thus far show the company is on track – capacities across all production lines are up, giving Kronospan scope to react to surges in customer demand.
One of Kronospan’s strengths is the ability to draw products from other sites and perhaps nowhere is this more evident than at Chirk, which has supplied OSB to its UK customers by importing from sister factories. Kronospan’s Latvia and Luxemburg mills are currently the chief manufacturers of Chirk’s OSB offering, although, as demand grows, it can tap into supply from any site, working on the principles of the best logistical solution, the best cost base and the most suitable board size or product type. This tactic has earned Kronospan a “sizeable” share of the UK’s OSB market.
The strategy also works across all board types and, along with building markets, provides an effective “disaster recovery” solution. “If a line were to go down on Monday we would have deliveries from the other plants by the end of the week,” said Mr Scheiblreiter.
“If we outsell here we can buy in [from other Kronospan factories] and then invest again to improve our own capacities,” added Mr Shaw. “It is very much a case of feeding market demand with product which, in turn, builds the market.”
The company is keen to capitalise on the growing market for OSB – a market which Mr Scheiblreiter is confident will double “at least”, driven by demand from the construction industry generally and timber frame in particular.
“In the last five years it has purely been availability that has limited the growth of the OSB market,” he said.
The OSB line at Chirk is currently awaiting planning permission but once it gets the green light it will be a relatively straightforward job of ‘plugging’ it in to the newly available space and its ready and waiting pre- and post-production lines. It is entirely feasible, said Mr Scheiblreiter, that OSB will be produced at Chirk from 2020.
Of course, manufacturing product is one thing, marketing and selling it is another and the company has worked very hard on progressing product development, marketing and branding.
There are now three definitive brands, which help structure the sales function. Krono-original is the brand for consumer/ retail products such as laminate flooring, wall panels and accessories; Kronobuild is the full portfolio of raw board for the construction market (OSB 3, moisture and fire resistant MDF, P2 and P5, for example); and Kronodesign is the melamine faced and laminate products geared for the furniture and interior finishings sector.
In the UK, five area sales managers sell across all Kronospan products and to a raft of end users from builders’ merchants to distributors across many different industry sectors.
Chirk has its own marketing department, run by Emily Burgoyne, who works closely with Kronospan’s centralised marketing operation. In this way products manufactured across the whole group can be promoted uniformly.
Marketing is now much more co-ordinated and structured, said Ms Burgoyne, with a specific focus each month and media – digital and print – planned in quarterly blocks. The schedule is already looking at the final quarter and into next year.
The company also works closely with its distributors who now receive a quarterly ‘Marketing tool kit’, helping them get the best out of the products.
In addition, 1,500-2,000 samples are sent out each month and each is followed up with an email and phone call.
Centralisation also applies to product development for the Kronodesign range. Here, Kronospan’s operation in Cyprus develops designs from raw material – photographing timber to create digital images that then become the melamine overlay.
“We have the intellectual property of the designs which gives our customers security against competitors plagiarising them,” said Kevin Davies, the sales manager for Kronodesign in the UK. “We have gone from being a follower in this process, to being a leader.”
Some of Kronospan’s factories operate as centres of excellence, feeding product into other sites. The Croatian factory is the source of acrylic and metal products, for example, while investment at the Hungarian site has focused on high gloss products.
“The ‘Global Collection’ is based on a four year programme,” said Mr Davies. “We launched a range in 2018 that runs to 2022.
“In addition, each year we have ‘Trends’, the next generation of which will be launched this November at an event to which we invite more than a thousand customers from across the world to view the new decors over a one or two week period.
“When we launch decors every factory in the group buys in to all of them and every site has every product ex-stock, available to the customer within 48 hours,” added Mr Davies. “So global customers can source locally to themselves.”