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No Sleeping Giant, MB continues its quiet evolution 

Under fire for flat stock prices and a trail of red ink, MB eyes a return to profitability through steady growth of its building products division outside of British Columbia 

When MacMallin Bloedel Ltd. of  Vancouver announced in 1994 that it would sell off its Harmac Pulp Division in two separate public offerings, company president R.B. (Bob) Findlay said that the company was refocusing its activities. 

"It has become clear to us that MB needs to sharpen its focus a number of businesses," Finflsy said at the time. "Our strategy is to grow our building materials, groundwood printing packaging papers and packageing businesses in size and value  in the  coming years." 

That strategy, Findlay said, evolved out a year-long period of self-evaluation that impressed a need for a leaner, more profitable operation  The  target was an II per-cent return on shareholder equity in each of its remaining business divisions.  That, as they say, was the plan. The reality, been somewhat different. Earlier this year, management came under heavy scrutiny from the  press, investment analysts and some instiutional investors. Rumours had the company divided up, sold off piecemeal, senior management replaced by mysterious champions of the shareholders, and mills and operations shut down or down-sized. 

What happened to MB in the interim? And where, a lot people are wondering, is Canada's largest forest company headed in the future? At this writing, MB has just reported a net loss of $5 million for the second quarter of 1997. In itself, that isn't overly worrisome. What is attracting attention, however, is that this is the company's fourth consecutive negative quarter. Last year, MB had net earnings of only $57 million on sales of $5 billion. As one newspaper report pointed out, the company hadn't even enough money to cover its $75 million dividend payment in 1996.

Compounding this is the contined flat performance of its common es. They have been in the doldrums in recent years and many analysts and institutional investors are unhappy with a poor return on shareholder equity. This situation is not unique IB and is characteristic of the forest industry, not just in BC but to some extent of the industry throughout North America. Ross Hay-Roe, a Vancouver-based forest idustry analyst with Equity Research , observes that the heat is on MB to stock performance. "The pressure is o n to get the stock up one way or another," says Hay-Roe. "One way that a lot of people think you could get the stock up would be to break the company into pieces. They made money in the second half of 1993 and through 1994, 1995 and the middle of 1996, but they've been losing money since, and they still are." 

MacMillan Bloedel is an integrated forest company. In the late 1980s, the product mix included lumber, plywood, pulp, paper and packaging. The company had holdings from British Columbia to the US and Europe. 

In 1990, almost 60 per cent of its $3 billion of operating assets were in BC, 33 per cent in the US, just under four per cent in the rest of Canada and just over three per cent in other countries. 

By the beginning of 1997, the operating assets had grown by 50 per cent to $4.6 billion in value. The company had more assets in the US than in BC, almost 39 per cent against less than 38 per cent. Interests in the rest of Canada had grown to 14.5 per cent and in other parts of the world, particularly Japan, to almost 9 per cent; this despite the sale of some European assets. 

Since 1994, MB has sold its interests in KNP BT, a giant Netherlands-based paper company and in Island Paper Mills, a printing and writing paper company and a sheet feeder plant at its Barcor, Russelville, Ark. site. 

In the wood products side, the company has made a number of significant new investments. In solid wood, Plenk's Wood Centre of Chemainus, BC, and 49 per cent Mid-Island Reman of Nanaimo are remanufacturing operations producing doors, windows and other manufactured the wood products for both the North American and off-shore markets, such as Japan and Europe. Also, MB purchased Green Forest Lumber  Ltd. of Toronto, a successful lumber manufacturing and distribution company. 

The most dramatic moves, in terms of growth and expansion into different products, include the addition of an OSB plant in Wawa, Ont., and a 50 percent interest in another in Mirimachi, NB; interests in MDF plants in Pembroke, Ont. and Pennsylvania in the US: and a 90 per-cent interest in a complex in Mexico. 

"We haven't had a lot of growth in the solid wood side of our business," says Craig Neeser, NM's senior vice- president for solid wood with responsibility for the company's logging and sawmilling operations. "We have grown in OSB and MDF." 

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