SUNBIZ

‘New Life Breathed In Pine Industry’

The Fiji Pine Group of Companies this week announced 2014 Group Operational Profits of $21.3 million. In comparison with Group operating losses of around $5 million in 2010 and similar
18 Apr 2015 09:20
‘New Life Breathed In Pine Industry’

The Fiji Pine Group of Companies this week announced 2014 Group Operational Profits of $21.3 million.

In comparison with Group operating losses of around $5 million in 2010 and similar amounts in years prior to that, that is an astonishing $26 million turnaround.

If these results are anything to go by the debt ridden companies that were widely reported to be on the verge of collapse have made arguably the best turnaround in the history of state-owned entities.

We get the opportunity to do an in-depth report and ask a few important questions to the man at the helm of the Fiji Pine Group of companies, executive chairman, Faiz Khan.

We ask him what are the secrets behind such a huge turnaround and his plans going forward?

Could you explain a little about the Group profits?

Firstly these are consolidated operating profits of Fiji Pine Ltd, Tropik Wood Industries Ltd, Tropik Wood Products Ltd and Fiji Forest Industries Ltd. We decided couple of years ago that due to transfer pricing issues that were abused by past management to exaggerate profits of a particular company whilst pushing losses on another, we will only report consolidated profits for comparison purposes.

Second, we have removed forest valuation fluctuations in reporting profits, as forest valuations can be highly subjective and was manipulated by executives in the past to hide losses during reporting.

It’s important to us that there is no financial engineering in how we report. We have to be honest to ourselves if we are to continuously improve.

The $21.3m is audited operating profits for 2014 and as you rightfully point out it denotes a turnaround of $26 million compared to 2010.

However, I emphasise that $26 million turnaround is just a number, the result of improved processes and financial discipline.

But the financial turnaround is phenomenal by any assessment. Pine Group of Companies was widely reported to be insolvent and on the verge of collapse. How have you achieved this turnaround? What do you mean by improving processes and $26 million just being a number?

We have been through some very tough times. At the beginning of 2011 the companies had trade creditors aging of around 300 days.

Cheques to creditors would go stale and be re-written. External debts were not being paid on time and our senior financier was contemplating appointing a receiver. Important capital projects were partly complete and on hold because of lack of funds and poor planning.

As a result we were not sleeping at nights because the turnaround needed to happen ‘yesterday’; every cent needed to be made and every cent saved where possible. It must be emphasised that the poor manner in which the businesses were previously run presented opportunities everywhere to do just that.

In 2011 we embarked on a drive of improving our processes – how do we look after our people, how do we make an expenditure, how are decisions made etc – effective systems were created. We were quite successful.

We have consistently broken operational profitability results in 2011, 2013 and now 2014. In February 2014, we went and cleared a $5.1m outstanding loan by writing a single cheque from our bank account; we have paid loans that were taken by Fiji Pine as far back as 1985.

However, we don’t start the year by saying to ourselves that we will break past years’ profit records. We simply go to work on a daily basis with a view to improving the processes and people of the organization; to bring about continuous improvement and change; to have a curious mind and learn from other success stories and our own failures; to try to make good decisions.

The financial results are just a by product. That is why it’s just a number. It is what it is.

 

But you would agree that businesses always compare with the past for comparison?

Correct. It is important to compare for performance assessments but at the same time it is a mistake to become prisoners of such comparisons.

Many of the cost and revenue structures of companies performing poorly are totally flawed. How do we compare a pathetic to an average, and still understand what room is left for improvement?

To truly restructure a company, particularly one that has not been performing well, we have to remove historical bias.

I could be sitting here and reporting a $5 million group operating profit and claim to have achieved a turnaround of $10 million when compared to 2010.

You might still clap. But you will be clapping at results that are $16 million short – now we know that with the benefit of hindsight.

What you see at Pine Group is a successful restructure of our processes that in turn is giving us these record results.

Could you explain more about the restructure of Pine Group?

All key performance indicators have improved a few-fold.

Our landowners received $2.85 million in 2014 in addition to the ground rents paid through TLTB. Our landowner relationship has improved. Leases are being voluntarily renewed.

Our staff have excelled in their performances and delivery. There is a sense of belonging, team, loyalty and security.

We have a great meeting place at the 3 star canteen facility where we give free meal vouchers. We are building a gym this year.

Our restocking program is back on track. We are planning long term for the future.

Our factory capital is being upgraded. The $16 million sawmill factory upgrade is happening through cash flow set aside from operations without external borrowing.

 

What would be the key contributing success factors?

Our people, our landowners, integrity, better communication, improved processes, improved markets, clarity, financial discipline, value for money capital expenditure, ability to make decisions, and successful risk taking would be the key ones.

Having achieved so much where to from here?

Records are there to be broken. The 2014 record described by some as meteoric will also be broken. It could be in 2015. It could be in years to come. When? I don’t know.

Our goals going forward is to ensure we continue to strive to improve our processes. We want to empower our people, bring in more youth, give them greater clarity on their roles, make them good decision makers, each leading his or her own department and its human resource functions.

We would like to see our six forest-based companies and trusts who receive significant funding every year from Fiji Pine Ltd, to operate successfully, consequently providing greater returns and improving the lives of our landowners.

Ultimately we want to make sure that irrespective of who is at the helm of Pine Group of companies it continues to excel. That would be the greatest achievement of all.

Feedback: rachnal@fijisun.com.fj

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