Montreal The Canadian Club

John D. Williams – Président et chef de la direction - Domtar Corporation Cultiver le changement : améliorer la performance pour mériter de grandir

Version audio | Version PDF (discours en anglais seulement)

(N.B. : Seule l'allocution prononcée fait foi)

Intro

  • Distingués invités, collègues, mesdames et messieurs.
  • Permettez-moi tout d’abord de remercier le cercle canadien de Montréal pour cette invitation dans le cadre des Rendez-vous avec nos PDG. C’est un plaisir pour moi d’être ici aujourd’hui parmi vous.
  • Le plaisir est d’autant plus grand qu’il s’agit d’une première allocution pour moi depuis mon arrivée à Montréal au début de 2009, prêt à affronter la dure réalité de l’hiver québécois armé de mon kilt, et je vous épargne le visuel !
  • Les plus perspicaces - ou les plus honnêtes - d’entre vous aurez remarqué un très léger accent dans mon français qui cache plutôt mal mes origines anglo-saxonnes.
  • Comme j’atteins déjà les limites de mon français, rest assured, I will immediately revert back to English for the remainder of my speech so that what I say will be easily understood. At least by me!
  • When asked to give a speech to such a distinguished audience it is always a struggle to find something useful and insightful to say that has not already been exposed a thousand times.
  • As Winston Churchill once said, the key to an effective speech is to “be brief and be gone”. Something I will attempt to live up to today.
  • So before I begin, I want to thank the team at Domtar, many of whom are here today and most importantly I would like to thank my wife who was prepared to be uprooted from a Scottish Island to come here!
  • Let me now turn to Domtar and to the content of my discussion today.
  • “Improving performance to earn the right to grow”, has been Domtar’s journey since I have arrived.

The insights I would like to share with you today are particular to the situation in which I find myself and I certainly don’t offer them up as a template for success or failure.

  • They are merely my thoughts on what Domtar faced as I took up my position as CEO and what I have learned in the process.

 

Domtar legacy

  • Domtar has quite a legacy and I think it is worth remembering that the company was actually founded in England – and in 1848 no less!
  • This once small British concern has traveled a long road since then.
  • Today Domtar, with 2009 sales of over five and a half billion dollars, is a Fortune 500 company.
  • It has a market cap. of approximately 3 billion dollars, and happens to be one of the largest companies by market capitalization in the Russell 2,000 index.
  • Domtar has strong paper brands, high quality products, a seasoned workforce, and is among the most cost-competitive papermakers in North America.
  • Most important, the Company has an enviable sustainability positioning with an extensive line of paper products certified by the highly regarded Forest Stewardship Council third-party forestry certification.
  • We have a network of world-class mills that are amongst the most modern and efficient in North America.
  • But that didn’t happen overnight, and the Domtar I have just described to you only came to be rather recently thanks, in great part, to my predecessor who is here with us today: Raymond Royer.
  • So if you will indulge me for a moment, I need to give you some context on where Domtar stood before 2009, and how its journey eventually crossed with mine.

 

Significance of 2007 transaction – JDW path to Domtar

  • In March of 2007, Domtar Inc. combined its operations with the fine paper business of Seattle-based Weyerhaeuser Company to create Domtar Corporation, a U.S. incorporated company with sales of over five and a half billion dollars in 2009.
  • This historic cross-border transaction transformed Domtar into the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on capacity.
  • What is uncoated freesheet paper? Fine papers are essentially photocopying, envelopes, book papers and other printing papers.
  • Domtar is also North America’s largest manufacturer of market pulp.
  • In other words, a considerable enterprise.
  • This transaction was considered transformational to the industry because it was bringing the number two and the number three producers together to create a new leader with the widest footprint to serve customers in North America.
  • The goal at the time was not only to quickly integrate the businesses but obviously to successfully capture over 200 million dollars of synergies over two years, after which a new CEO would be appointed as Raymond retired after 12 years at the helm.
  • A new Board had been created, and the committee formed to identify a new CEO swung into action so I had a series of interactions with them through the summer of 2008. It quickly became clear to me that Domtar was where I wanted to be.
  • And here I learned my first lesson: SAY WHAT YOU THINK.
  • Intelligent people are looking for a leader who will analyze the situation, challenge current thinking, as well as create activity and change.
  • Throughout the recruitment process I remained open and honest about my perspective and the kind of change I thought I could bring and the challenges I felt the business faced long term.
  • By October 2008, it was officially announced that I would be taking the helm from Raymond at the end of that year.
  • And there I was, ready to take my post, when November and December 2008 rolled around - and it was as though the lights had been turned off! WHY DID I GET MY FAMILY INTO THIS? I THOUGHT AT THE TIME!
  • The recession - although it hadn’t been called that just yet – precipitated dramatic demand declines in most of our end use markets including fine papers and pulp.
  • And all of this lasted well into the first half of 2009. Let’s just say we didn’t, and I didn’t, see this storm coming.
  • But by then, I was on my way here already either way! And I stand before you here today with no regrets.
  • But there was a second lesson learned here as well: YOU CANNOT ACCURATELY PREDICT THE FUTURE.
  • As Harold Macmillan – a British Prime Minister of the 50’s and 60’s – said when asked what worried him the most he replied “events, my dear boy, events”.
  • Which is why we must always be ready and willing to adapt, and we did just that. The textbooks would call it strategic agility.
  • Thanks to the 2007 transaction, and despite being relatively highly leveraged, Domtar was equipped with the right foundations to make it weather the storm but maybe, for just a moment, I wondered if we could adapt fast enough to a serious unheard of challenges.
  • Those first few months from January 2009 were the toughest any of us have experienced in our lifetimes.
  • It was a challenging year for our economy and for many business sectors. Not only companies in our industry were tested, but they were tested across the whole business spectrum and many did not survive.
  • The paper industry has had rough times before but nothing like this.
  • Secular demand decline was no surprise to this already mature industry but this was a different beast altogether.

 

Domtar journey under new CEO – Improving performance

  • Most of our end markets in papers were going from bad to worse. Pulp prices collapsed. The landscape was looking grim. What to do?
  • And now comes the third lesson, a very important one: JUST KEEP IT SIMPLE.
  • Leading through tough times requires clarity and simplicity in our communication, both externally and internally.
  • It is also vital that the Company’s Leadership is in control, united and not giving conflicting messages to shareholders.
  • The mantra we developed was simple: Customers, Costs, Cash, the best I know to create shareholder value. Communicated consistently and with clarity at every level of the organization. These 3 Cs quickly proved to be our fundamentals for success.
  • Our customers are the reason we are in business so no matter the difficulties we faced or the downtime we took, we had to make sure we could serve our customers; be responsive to their needs and keep focused on how we add value.
  • That was, and continues to be, our key value proposition as the market leader in North America.
  • We also began cost reduction measures that we implemented aggressively to adjust to the recession, changing processes with regards to purchasing and spending practices across the company. It brought out our best practices.
  • We continue to manage our costs closely and save wherever we can, but without ever compromising on the quality of our services and products
  • We generated impressive free cash flow levels in 2009 at over 500 million dollars, and were able to substantially pay down debt, improving our credit profile and the Company’s financial flexibility.
  • Without having predicted the issues and challenges that arose – or at least their severity in many cases - we were able to adapt quickly and respond aggressively to a changing environment. And this was accomplished by keeping it Simple and Clear, but Effective.

 

Where Domtar stands now – having earned the right to grow

  • Here we are today, in a better position than any would have predicted a year ago.
  • And this takes me to lesson number 4: employee empowerment is something an organization must strive to. I can say that mobilization and motivation is greatly enhanced when you carefully determine the RIGHT SET OF KEY PERFORMANCE INDICATORS.
  • By setting goals that are not guaranteed but truly attainable, you know that people will spare no efforts to do what is absolutely necessary to make it through.
  • Not being afraid of benchmarking your performance to that of your peers, because at the end of the day it is the end-result that matters to shareholders, really empowers your employees - they want to be part of a winning team.
  • Honesty and transparency with our Board about what I felt could be accomplished in this environment was critical.
  • We did significantly improve performance in 2009 and the reason we did was by focusing on the fundamentals. Our team has earned the Board of Director’s support for my “keeping it simple” approach.
  • So here I am with lesson number 5: We would not have gotten here if I didn’t have a CLEAR SUPPORT FROM THE BOARD OF DIRECTORS, which is only achievable by staying transparent on goals, challenges, and being honest on what’s going on.
  • That is why we can actively start sowing the seeds of change i.e. building a platform for Domtar for the future. So, what are we doing now?
  • We continue to focus on paying down debt and maintaining a strong balance sheet.
  • Our net debt to capitalization ratio stood at an industry-low 35% at the end of December, so we have a solid Balance Sheet in an embattled industry.
  • We are cleaning up our portfolio of assets. This includes the divestiture of businesses and assets that we consider non-core.
  • We recently announced the sale of our Wood business to EACOM Timber Corporation, which will soon establish its headquarters in Montreal. The transaction is expected to close at the end of the second quarter.
  • Our desire to sell has nothing to do with the quality of the business because it is a very well run business, and well positioned for the recovery, and in great part this is thanks to JF Merette, who is here today, and his hard working team – I applaud them.
  • However, forest products was not the reason investors were becoming shareholders of Domtar. At 3% of our total company sales, the business had become marginal from an earnings standpoint.
  • EACOM has our support to assure a smooth transition and we will maintain an equity stake in the new company.
  • The transaction does not affect the rest of the business because our sawmills did not, for the most part, feed our pulp and paper system.
  • We continue to maximize the value of our core assets by making upgrades to improve profitability, energy efficiency and environmental performance, all while maintaining low CAPEX levels.
  • We have a couple of investment projects underway in our Canadian mills, thanks to the federal Government’s Pulp and Paper Green Transformation Program that supports companies investing in energy efficiency improvement at their mills.
  • We happen to be the largest industry recipient of the funds and I would like to thank the government for their support.
  • Lastly, but most importantly, we are tapping into the expertise of our most valuable contributors – our Employees and Customers – to find new paths for innovation in a mature industry.

 

Future of Domtar – Industry

  • We now face a new reality and we need to be proactive in finding ways to offset the secular demand decline in our core uncoated freesheet business.
  • Within papers we will keep our focus on key market differentiators for customers – like FSC certification for example.
  • While our top line (papers sales) keeps shrinking, we are doing quite well but we are realistic in knowing that this will eventually catch up to us. We need to do something before that happens.
  • If I push forward twenty to thirty years, the future of the industry lies in my view in alternative wood fiber-based products, there is no doubt about that.
  • On this I am thinking about bioenergy, ethanol, carbon fiber, clothing and many other potential uses. We have to think of wood as a renewable resource with possibilities expanding beyond paper and traditional wood products.

 

Sowing the seeds of change

  • While we evaluate our options, we continue to improve performance as we earn our right to grow; all without forgetting what we, and I, have learned already during this short but eventful journey, one that is still only beginning.
  • So I continue to quite openly, 1) SAY WHAT I THINK; to my direct reports, all colleagues, and of course, the Board. By the way, I happen not to be not the only one saying what I think which allows for occasionally robust debate!
  • And 2) we are KEEPING IT SIMPLE when communicating goals and challenges to colleagues. There is nothing better then to know what is to be done and what role you can play. Everyone steps up to the plate.
  • 3) We will keep our focus on building a company that is flexible and can easily adapt to change i.e. has built-in strategic agility.
  • This way, we will always be ready to adapt to a future one cannot accurately predict. And that’s also why we need to “sow the seeds of change” so that we can shape our future.
  • This will be a future that will offset secular decline in our core business that will be based on our core competencies and expertise.
  • We need to determine the RIGHT SET OF KEY PERFORMANCE INDICATORS to keep the troops mobilized towards a common goal.
  • Finally, I will continue to earn the support of the BOARD through transparency and a “say what you think” approach as I continue to lead the company.
  • The challenges and the urgency of the situation we faced from the get-go back in January 2009 helped me quickly find my place in a company with an incredible legacy.
  • I am quite grateful as I stand before you today. I actively look forward to a bright future at Domtar now that we have emerged not only as a survivor, but a clear winner.
  • With the resourceful and innovative team I have in place, we will find the right solutions and create near term opportunities to take our future into our own hands.
  • As we “sow the seeds of change”, I am confident that we will continue to make important progress toward our company’s growth and continued success.
  • To finish I want to take a little time to discuss decision making as that seems key to the role of CEO.
  • As the majority of CEOs seem to be men, I wanted to highlight how our spouses give us the illusion of being decision makers (tell story).
  • So in closing, once again many thanks for the honour of sharing some insights with you today and every success in 2010.
  • Thank you and I hope I lived up to Churchill’s words “Be brief and be gone”.
  • Thank you.

John D. Williams

John D. Williams occupe le poste de président et chef de la direction de Domtar Corporation depuis janvier 2009. Il est également membre du conseil d’administration.

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