Metsä-Serla Oy

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Metsä-Serla Oy

Fabianinkatu 8
SF-00130 Helsinki
Suomi
Finland
(90) 171 611
Fax: (90) 175 141

Public Company
Incorporated: 1986
Employees: 10,873
Sales: Fmk8.70 billion (US$2.40 billion)
Stock Exchange: Helsinki

Metsä-Serla Oy was formed in 1986 from a merger between Metsäliiton Teollisuus Oy and G.A. Serlachius Oy. It is the tenth-largest industrial company in Finland, the fourth-largest company in the Finnish forest industry, and one of the ten largest forestry companies in Europe. It has the most varied product range of any company in the Finnish industry, being active in four main areas with the following contributions to 1990 turnover: pulp is 20%, paper and paperboard is 33%, corrugated board and tissue paper is 28%, and sawn timber and building materials is 19%. About one-third of its sales are within Finland, while more than half go to other countries in northern and western Europe.

The history of what is now Metsä-Serla begins in the 1860s, when a steep rise in the price of sawn wood in Europe made the exploitation of Finland’s gigantic timber reserves economical for the first time. Even now Finland is one of the most densely wooded countries in the world, with 76% of its land area covered by forest. An engineer named Knut Fredrik Idestam started building a groundwood plant in Tampere in 1865. Three years later, when he moved to Nokia to build a second and bigger plant, he invited his friend Gustaf Adolf Serlachius, a pharmacist, to manage the Tampere mill. In 1868 Serlachius moved on from there to Mänttä, to start his own mill for grinding wood into pulp. It was successful enough to finance the building of a paper mill, with two paper machines, at the same site in 1881. Nine years later this wooden building was destroyed in a fire: Serlachius’s continuing prosperity enabled him to replace it with a brick and stone building containing three paper machines capable of turning out 5,000 tons each year. In 1913 the business, by then incorporated as a public company, came under the direction of the founder’s nephew, G#x00F6;sta Michael Serlachius. In spite of the disruptions caused by World War I and then by the civil war which followed Finland’s declaration of independence from Russia, he pressed ahead with an expansion of the company, both by adding on new plant at the Mäntta site, including a sulfite pulp mill in 1914, and a sulfite alcohol plant in 1918, and by acquiring other businesses, such as a saw mill at Kolho in 1916, and the Kangas fine paper mill at Jyväskylä in 1918. In 1917 G#x00F6;sta Michael Serlachius acquired the Tampere Paper Board and Roofing Felt Mill, which Gustaf Adolf Serlachius had managed nearly half a century earlier. In the intervening years it had passed through various hands, finally falling into bankruptcy when the delivery of a new corrugated board machine from Germany was delayed by the outbreak of World War I. The machine eventually arrived in 1920, and the mill, renamed Tako Oy in 1932, went on to produce a range of boards and building materials in its plants, one of which was the largest building in Tampere.

After 1918, and in line with the general trend in the Finnish forest industry, Serlachius abandoned the production of brown wrapping paper for the Soviet market, which was being torn apart by revolution, civil war, and foreign intervention, in favor of supplying newsprint to Finland’s new market in western Europe. In this period, Finnish forest products were still mostly of a lower quality than those of rival companies in Norway and Sweden. Still, Serlachius and the other Finnish companies prospered, even in this new, more demanding market, because the low valuation of the Finnish markka kept their export earnings high, even during the Great Depression, when the Finnish forest industries maintained continuous output through the use of plant and equipment modernized during the boom years of the 1920s. By 1939 Finland was the world’s leading exporter of paper.

Gösta Serlachius retained control of the company up to his death in 1942, when his son R. Erik Serlachius became managing director. The man who had overseen the expansion of the company into a large and diversified enterprise is commemorated in the Gösta Serlachius Museum of Fine Arts in Mänttä. This houses several hundred works of art collected by Gösta Serlachius or inherited from his uncle and passed into the hands of a fine arts foundation established in 1933. Gustaf Adolf Serlachius had been among the first patrons of Akseli Gallen-Kallela, generally considered Finland’s greatest painter, and Gösta Serlachius, who shared his uncle’s enthusiasm, assembled the largest private collection of this artists’s work, now the main feature of the museum.

At the time of Gösta Serlachius’s death, Finland was engaged in an alliance with Nazi Germany against the Soviet Union. In 1944 Finland surrendered to the Soviet Union, having failed to regain the lands—about 8% of its area—that it had ceded to Stalin after a brief war in 1939-1940. These two wars meant that the forest industry could not sell its products in Britain or the Americas, but it kept up production for its continental European markets throughout. Some of the companies diversified: Serlachius began producing chemicals and switched from making newsprint to making printing paper during these years. Its plants in Tampere sustained some bomb damage and then had to contribute to the reparations demanded by the Soviet Union. These were in addition to the loss of land, which was a serious blow to the forest industry in general, since the areas once again ceded to the Soviet Union, in 1947, included 12% of Finland’s forests, 20% of its wood- and pulp-producing capacity, and 10% of its paper and paperboard capacity.

It did not take Serlachius long to recover from the impact of these events. The company was now producing a range of papers, as well as paperboard, and in the late 1940s it expanded production of parchment paper at Jyväskylä, began producing impregnated wood at Kolho, and started work on the installation of its seventh paper machine at Mänttä. Paperboard production at Tampere prospered as the pre-packing of goods in cartons for delivery to retail outlets became the norm in Finland, the company profited from selling pulp to the United States and returned to making newsprint, and the prices of all kinds of paper products, as of other raw materials, rose sharply as the ending of rationing and the outbreak of the Korean War boosted demand.

Finland’s openness to international economic cycles cut both ways; when prices fell and recession set in at the end of 1951, the forest industry’s expansion was slowed, and the levying of taxes on excess profits during the Korean War temporarily inhibited investment. Once the economy had recovered, Serlachius was able to begin production of copy paper and other special papers for technical uses at Jyväskylä and to modernize its plant at Tampere. In 1961 Serlachius began producing tissue paper, using the eighth paper machine to be installed at Mäntta. This latest venture was so successful that another tissue paper machine was started up in 1965. The timber division of the company was also modernized, with the introduction of an automated saw mill at Kolho in 1963. In 1965 the company started to expand by acquisition as well as by internal growth, purchasing the Vammala plywood factory and the Lielahti mill, which produces dissolving pulp for use in the making of artificial silk. Serlachius’s capacity for producing cartons was expanded in the 1980s with the acquisition of Järvenpään Kotelo Oy and Pak-Paino.

The history of Metsäliiton Teollisuus was shorter than Serlachius’s, but organizationally more complex, since it was the creation, not of a single founder and his successors, but of the Finnish producers’ cooperative movement. It has its origins in 1934, when the Central Federation of Agricultural Producers set up Metsäliitto Oy, with Ilmari Kalkkinen as managing director, to supervise the export of products from its forestry department. Kalkkinen was also managing director of the Osuuskunta Metsäliitto, the cooperative organization of forest owners, which took over control of Metsäliitto in 1947. The company then diversified into sawn timber and impregnated wood, and acquired both a plywood factory at Hämeenlinna and pulp, paper, and paperboard mills and chemical plants at Äänekoski. These mills later became part of a subsidiary company, Metsäliiton Selluloosa Oy.

Kalkkinen retired in 1959 and was succeeded by Viljo A. Kytölä, under whom the board of directors and the management of the cooperative and of Metsäliitto were combined from 1960 onward. During the 1960s Metsäliitto’s plant and equipment were extensively modernized. In 1965 it became the main shareholder in Savon Sellu Mills and set up another pulp-producing subsidiary, Oy Metsäpohjanmaa-Skogsbotnia Ab. Meanwhile Osuuskunta Metsäliitto established three more companies, Teollisuusosuuskunta Metsä-Saimaa, which operated sawmills; Oy Metsäliiton Paperi Ab, which had a paper mill at Kirkniemi, and Metsäliiton Myyntikonttorit, which brought together the cooperative’s sales offices. In 1973 all these operations were reorganized. Osuuskunta Metsäliitto took responsibility for all wood procurement and marketing, with Metsäliiton Myyntikonttorit and Metsäliitto Oy as subsidiaries, while Metsäliiton Selluloosa Oy, renamed Metsäliiton Teollisuus Oy, became the parent company for the Metsäliitto groups’s production activities, thus leaving Metsäliitto Oy as a timber procurement company, and the largest supplier of timber in Finland. Following Kytola’s retirement the managing directors of each of these bodies—respectively Mikko Wuoti and Pentti O. Rautalahti—became deputies to a single powerful president, Veikko Vainio. In 1980 all three were replaced, Vainio by Wiioti, Wuoti by Matti Puttonen, and Rautalahti by Ebbe Sommar. By 1986, when Metsäliiton Teollisuus began negotiating the merger with G.A. Serlachius, its production units were making not only pulp, paper, plywood, and various kinds of board but also loghouses, saunas, doors, and windows.

The merger between Metsäliiton Teollisuus and G.A. Serlachius took effect from January 1, 1987, with Gustaf Serlachius as chairman of the board, Mikko Wuoti as his deputy, and Ebbe Sommar as managing director. The two groups were of similar size, for Metsäliiton Teollisuus had a turnover of Fmk2.5 billion and assets worth Fmk3 billion, while the equivalent figures for G.A. Serlachius were Fmk2.8 billion and Fmk3 billion.

Metsäliitto held nearly 57% of the shares in Metsäliiton Teollisuus at the time of the merger and came to hold the largest single portion of Metsä-Serla’s shares, 27%, and votes, 48%, proportions which have risen slightly since the merger was completed. The other leading shareholders are the Gösta Serlachius Art Foundation, Gustaf Serlachius himself, and several Finnish insurance companies. The new company started out with 17 subsidiaries in Finland and 14 in other European countries.

Metsä-Serla’s ten divisions faced serious problems, with excess capacity in eight divisions—magazine paper, fine paper, paperboard, domestic packaging, tissue paper products, chemicals, sawn timber, and building materials—alongside some success in international packaging and panel products. During its first year the company brought a new fine-paper mill at áánekoski into operation, disposed of seven subsidiaries not directly linked to forestry, and increased its majority shareholding in Oy Metsä-Botnia Ab, a bleached pulp producer. Profits rose by 17%, largely because demand for paper, cartons, tissue paper products, and building materials improved, but the company’s work force was cut from about 13,200 to about 12,000. Production costs fell appreciably, compared with 1985, because a reform of Finland’s energy tax and falls in the prices of fuel oil and coal allowed the company, which derived 85 % of its electricity from its own power stations or from firms in which it has shares, to reduce its spending on energy.

Profits rose again in 1988 and in 1989 as demand grew in all the areas of Metsä-Serla’s output. A new paper mill was started up at áánekoski to help meet the rising demand. Early in 1989 Metsä-Serla bought the tissue paper and hygiene products company Holmen Hygiene from its Swedish parent company Mo Och Domsjo, renaming it Metsä-Serla AB. This company had been the first in the world to produce un-chlorinated tissue products, in 1988. Metsä-Serla retained its plant in Sweden but sold off its factories in Belgium and Britain. The tissue paper products division became the second-largest producer of such products in western Europe, supplying half the market in the Nordic countries.

Following the acquisition of another pulp and liner board company, Kemi Oy, in which Osuuskunta Metsäliitto had had shares since 1950, the bleached pulp subsidiary Oy Metsä-Botnia Ab was reorganized in 1989, in order to reduce the company’s need for pulp from other sources. One of its two mills, at áánekoski, was absorbed into Metsa-Serla—to be run by a subsidiary called Metsa-Sellu—and the other, at Kaskinen, was assigned to a new Oy Metsä-Botnia Ab, which also took over Kemi Oy and Pohjan Sellu Oy in 1991. Metsä-Botnia is jointly owned by Metsa-Serla—(around 30%); Osuuskunta Metsäliitto; United Paper Mills, Finland’s largest forest products corporation; and the Tapiöla Insurance Group. Metsa-Serla then acquired 30% of the shares of United Paper Mills itself, in what was seen as a hostile takeover bid, but which Metsa-Serla itself justified as an attempt to develop cooperation between the two groups, building on the Metsä-Botnia venture. In April 1990 it vetoed the long-awaited merger between United Paper Mills and Rauma-Repola, but accepted the proposal two months later in return for seats on the board of the merged company Repola Oy and agreement on coordinating investments, marketing, and timber procurement. This agreement also led to the issuing of new shares in Mets#x00E4;-Serla to Rauma-Repola Oy, which ended the year with a 7.6% holding, now owned by Repola Oy.

In April 1990 Timo Poranen succeeded Ebbe Sommar. Just two months later Poranen announced that profits were likely to fall once again during 1990 and that the company still faced problems of excess capacity and rising production costs. Indeed, the whole Finnish forest industry was suffering from high production costs and an unfavorable exchange rate. The company’s restructuring continued throughout 1990 with the purchase of 75% of the shares in the British paper merchant company, the Alliance Paper Group, and the transfer of the panel products division to Finnforest Oy, in which Metsäliitto has 90% of the shares and Metsa-Serla has 10%. Metsa-Serla also pressed on with the building up of its stake in United Paper Mills, so that by the end of the year it held 34.1% of voting rights. At 21.1 % of the total shares it is the biggest single shareholder in Repola Oy, the parent company of United Paper Mills, and the two groups cooperate on pulp mill investment.

Metsä-Serla’s turnover in 1990 was nearly one-and-a-half times the combined turnover of the companies which came together to create it in 1986. Its high level of diversification, and its close connections with Osuuskunta Metsäliitto, which represents nearly 130,000 owners of private forests, with Metsäliitto, the largest timber supplier in Finland, and with Repola Oy, the country’s biggest private industrial corporation, provided the group with secure foundations for future growth as a leading player in the European forest industry.

Principal Subsidiaries

Metsä-Sellu Oy; Rakentajan Metsä-Serla Oy; Takon Kotelotehdas Oy; Oy E. Lindell Ab; Kalmar Snickeri AB (Sweden, 99.2%); Metsä-Serla AB (Sweden); Metsä-Serla Nederland BV; Alliance Paper Group plc (U.K., 75%); Hedsor Ltd. (U.K.); Soren Berggreen & Co. A/S (Denmark); Tissu Canarias SA (Spain, 63.5%); Cartonpack S.A. (Greece, 67%).