Aiming high3 December 2009
Today, the Berneck group operates a modern, integrated, industrial site near Curitiba, equipped with a new 342,000m3/year MDF line, a 624,000m3/year MDP (particleboard) line and a 300,000m3/year sawmill. A second site in Santa Catarina state is earmarked for a further complex, eventually to include two more panel lines – one for MDF, the other for MDP – each of around 500,000m3/year.
By any standards the rise and rise of Berneck over the past decade has been little short of stunning. Now its proud and tenacious president, Gilson Berneck, has set his sights on controlling one of a handful of giant national panel players emerging in the sector’s latest round of consolidation.
He admitted his company, with the help of foreign capital, was seeking to buy or joint-venture with another of the country’s seven remaining independent panel makers after two big merger deals were announced.
In the first, Brazil’s top MDF producer Duratex snapped up leading MDP maker, Satipel Industrial SA to create the largest panels group in the southern hemisphere. In a second deal, powerful Chilean forest products giant Arauco Celulosa y Constitución SA bought panels and laminate flooring manufacturer Tafisa Brasil from the Portuguese Sonae Indústria group.
Speaking to WBPI recently, Mr Berneck revealed that, in partnership with a Brazilian investment company, he planned to reach a deal with another player before the end of this year. “We will be one of the three or four big [panel] groups,he declared. He stressed his firm would only sign an agreement that gives Curitiba-based Berneck a controlling interest in the resulting group.
“We are open to discuss any situation: we could buy or we could make a joint venture.....[But] maintaining control is very important to us at this time,he told the magazine in July. But the entrepreneur remained tight-lipped on his likely takeover targets.
At that time, the president hinted that Berneck was in talks with Tafisa Brasil with a view to a joint venture deal. However, Arauco subsequently closed that deal.
One other independent player, not yet part of three or four big groups expected to emerge from the current flurry of mergers and acquisitions, is the southern MDF and MDP producer Fibraplac Chapas de MDF. A relative newcomer to the panel sector, it has grown rapidly in the past six years and now runs two MDF lines and one newly-launched MDP line at Glorinha, Rio Grande do Sul.
Former plywood maker Berneck only entered the MDF business last October when the company started up the 342,000m3/year Siempelkamp ContiRoll line at its industrial complex in Araucaria, close to the Paraná city of Curitiba. The launch came just as Brazil began to feel the worst effects of the global credit crunch and recession.
The 950m3/day thin MDF line’s start-up had been delayed due to the late arrival of the site’s big new boiler, when its São Paulo suppliers Sermatec/HPB were overwhelmed with an order backlog associated with the biofuels revolution in Brazil.
With the domestic panels market depressed since the start-up, Berneck was selling barely half the MDF line’s normal capacity up to mid-year 2009. The firm has concentrated on producing thin fibreboard, for which the line was specifically designed, with around 6% of its overall output feeding weak export markets in Latin America.
The Brazilian market was not helped by a sizeable national MDF capacity hike in 2008.
Berneck was one of three producers to bring new lines on stream within months of each other, exacerbating an increasingly depressed market situation.
“It’s difficult to say when the market will take off again. I think thin board in Brazil is not increasing, but there is enough to keep the plant operating,commented MDF line manager José Luis Dieguez when WBPI visited the plant in July. On that day, production was at a standstill as Berneck took advantage of a slack market to carry out essential repairs to damaged boiler pipework resulting from an installation fault.
However, Berneck has discovered a silver lining to the gloomy market clouds. The advent of thin MDF there has enabled it to target markets where finished hardboard is predominant. High density fibreboard (HDF) has also helped revive the fortunes of Berneck’s 11,000m3/month Hymmen finish foil line, which had lost out to board painted by the customers.
Eucalypt hardboard manufacturers Duratex and Eucatex supply a substantial domestic thin board market with ready painted panels, used particularly in the furniture and automotive interior paneling sectors.
“We are making thin [MDF] board with finish foil that substitutes for painted hardboard because of it’s better quality and the price is almost the same,explained Gilson Berneck. “Now we have thin board, the finish foil line is almost full.In July, the firm was preparing to increase production, working three shifts instead of two.
Based on its success with finished thin board, Berneck said it planned to raise the share of HDF produced on the MDF line from around 50% to 75% over the next 12 months. The advance of HDF in those markets has led to a fall of around 25% in the Brazilian hardboard price. Customers prefer pine HDF for its two-smooth-sides finish and lighter wood colour, according to the Berneck president.
Looking further ahead, Berneck is well prepared to expand its fibreboard business when the dark clouds of recession finally lift and Brazil’s vibrant MDF market recovers its former strength. The panel maker now plans to launch its second Siempelkamp ContiRoll MDF line in the richly-forested southern state of Santa Catarina by the end of 2012.
Once the 450,000m3/year line, with a 40.4m press, is completed on a one million m2 greenfield site at Curitibanos, Gilson Berneck aims to use it to turn out thicker standard MDF panels. At that time, the smaller MDF I line in Araucaria will be dedicated to thin board production, he explained.
Berneck’s original plan – in better times – was to install a big 850,000m3/year MDP continuous press line at its southern site. Its Araucaria MDP line was almost fully sold and demand was still strong in what was then a booming national marketplace. The eventual plan was to duplicate the integrated Paraná site in Santa Catarina.
Then, Gilson Berneck had to reassess the scheme on news that Duratex planned to build a huge one million m3 per year MDP line at its Itapetininga site in São Paulo state. Since Berneck had already bought the land and begun site preparation, the firm decided instead to install a 500,000m3/year MDF line first in Curitibanos, alongside a new lumber mill.
“With the MDF line and lumber business [on site] at the same time, we could co-generate energy and make lumber and thick MDF and produce just thin MDF in Curitiba,said the president. Earthworks are now complete on site and the MDF line is on order from Siempelkamp.
The irony of Berneck’s re-think is that the Duratex MDP plan for a massive São Paulo line was later shelved because of the worsening economic crisis worldwide.
It is unlikely Berneck will go ahead with its second MDP line at Curitibanos within the next five years, after other Brazilian producers launched three new particleboard plants at sites in the south of the country.
Gilson Berneck made clear the extra capacity planned for Santa Catarina is essential for the company if it is to become part of Brazil’s three or four large panel making groups of the future.
When WBPI visited the Araucaria plant, its existing Siempelkamp MDP line was still feeling the ill effects of the recession apparent in Brazil’s furniture sector since the end of last year. In mid-2009 that line was producing board at around 75% of line capacity.
It was in April 2006 that Berneck invested around US$3m to upgrade the wood preparation area in order to increase the capacity of that Siempelkamp line to almost 1,800m3/day. Since then, the board line has seen little change.
In view of market conditions and new capacity added by MDP competitors in the south, the firm expected to continue lower output for some time to come, although not below 70%. Gilson Berneck suggested it could be at least three to four years before his company’s MDP production returns to 100% capacity.
In the past two years, Berneck’s main Araucaria industrial site has seen substantial investments and big changes in the woodyard, wood processing and energy areas. Much of this came about as a result of the expansion of the lumber business and the addition of an MDF plant.
Key to the changes has been the addition of the MDF line, which required a woodyard expansion. Formerly, the site trucked in short, 3m long, ready-debarked pine logs from
Berneck’s plantations and the wood for the particleboard line was processed in Hombak flakers.
Today, a big secondhand debarker, bought from Duratex, has sufficient capacity to prepare unstripped pine logs needed for both panel lines. Earlier this year, Berneck was installing three new Pallmann chipping lines in place of the old processing equipment and the panel business uses good quality chips from the company’s big new sawmill next door. Meanwhile, bark and other wood waste from third parties provides material to fuel the biomass boiler.
The arrival of MDF production has meant a significant increase in the site’s energy consumption. Now, thanks to the integration of the different operations, Berneck said it is capable of generating a little over half of all the site’s energy needs.
“We are in a fortunate position in that we have an integrated site and are able to use the steam in all our processes to generate our own energy,explained Gilson Berneck’s son
Daniel who was responsible for the expansion of the sawmill operations.
“We are capable of generating 13MW of electricity here from our own steam consumption and we consume 22MW so that’s almost half and half.”
In July, Berneck was completing the installation of a new electricity converter station on site to enable the firm to sell all the power it generates to the grid and buy back the electricity it needs at higher voltage, at a price advantage.
Berneck is proud of its new lumber operation with a capacity of 240,000m3/ year. Until this year, its wood drying capacity was limited but, with the addition of five new kilns, the unit will be able to dry all wood by the end of this year. Exports represent about 70% of lumber output, while the rest feeds the home market, but the firm expects business will settle back in due course to a 60:40 percentage balance in favour of export.
A small offshoot wood products business maintained by Berneck manufactures teak sawn lumber and panels fed by the former plywood company’s 3,000ha teak plantations in Mato Grosso do Norte. Planted teak, which takes around 35 years to mature in the region, makes high-added-value products. The firm is still only sawing plantation thinnings.
Berneck, in common with most of Brazil’s other wood panel manufacturers, has suffered the ill effects of the global downturn and the financial crisis which overtook even vibrant Brazil. The company saw its profit of US$35m in 2007 shrink last year to just US$26.5m.
Nevertheless, for Gilson Berneck and his family there is no going back. Their broad experience of the forest products business, along with a ruthless determination to stay at the top of Brazil’s panels industry, come what may, should ensure Berneck’s survival at a time of radical change.