Top Guns - Russ Horner

Tracy Tjaden

| July 1, 2005

Russ Horner, NorskeCanada, 2004 revenues: $1.87 billion, Rank: 17 in TOP 100

WHAT WENT WELL IN 2004?
Continuing improvement in margins, reductions in costs and an improved safety record. Last year we reduced costs and improved margins by $104 million.

WHAT DIDN’T GO WELL?
The Canadian dollar absolutely devastated us. We cope with it by working to reduce our costs and trying to get product prices up.

AND IF THAT’S NOT ENOUGH?
At some point a company gets the low-hanging fruit out. Once you’ve reduced costs as much as you can, you have to improve margins by making higher-value products.

HOW ARE YOU IMPROVING MARGINS?
Making less newsprint. Last year 27 per cent of our revenue was from manufacturing newsprint. Five years ago, it was 80 per cent. We are much more of a magazine paper company now, and what that says is we’ve gone to higher-value products. Growth in magazine paper is very strong, year-over-year demand has been up over seven per cent.
We are also the biggest producer of
telephone directory paper in the world. Demand for that grade is up about nine per cent year over year.

BESIDES CURRENCY ISSUES, WHAT ELSE DOGGED THE COMPANY IN 2004?
The fact that B.C. is the only jurisdiction in Canada with virtually unlimited freedom among municipalities to tax heavy industry. We are seriously handicapped by a very high municipal tax rate that varies from moderate to severely excessive.

YOU’VE BEEN OUTSPOKEN ABOUT THIS IN THE PAST. WHAT RESPONSE ARE YOU GETTING?
The municipalities understand the position but they’re not sure what they can do about it. They’ve gotten used to living off of us, particularly where the mills are quite large.

THE EXCHANGE RATE AND TAXES: TWO ISSUES OUT OF YOUR CONTROL.
And the Canadian dollar dominates our landscape. It has cost us around $230 million a year in earnings so far. The company has not made an operating profit in three years.

WHAT DO YOU ANTICIPATE FOR 2005 AND BEYOND?
It’s still going to be a struggle. The Canadian dollar is easing now, which should help. We have continued to get costs down and improve margins but it’s going to take several years to recover from a blow like this.

BIGGEST LESSON LEARNED?
That the various levels of government in Canada are focused on all these fancy new-age industries which are very intriguing, but don’t provide much of the national wealth, like biotech – and nothing against biotech. But when it comes to the fundamental resource-based industries, which in B.C. are still the core of the economy they’re not paying very much attention.