From the Mid-East to the Mid-West

Nova Scotia’s Julimar Lumber started with sales to the Middle East, but has quickly developed American markets.

You won’t find too many trees growing in the desert or semi-arid regions of the world and the Middle Eastern owners of Nova Scotia’s Julimar Lumber have taken advantage of what appears to be an obvious market. But being astute business people, they also know it is important not to put all your eggs in one basket or, in this case, have all your lumber sales in one market.

Other independent sawmillers in the Canadian forest industry would do well to emulate company owners Dahesh Khalil, Ralph Shuaib, and Terry Saleh. They appear to possess the type of business savvy required to survive in the soon to arrive new millennium. The owners of Julimar Lumber realize that independent sawmillers can succeed in the global marketplace, with the right marketing approach and the right connections. They have succeeded despite having no previous sawmilling experience when they began operations six years ago. Their approach was simple and straightforward— they hired the type of people who could deliver the sawmilling expertise required.

Rarely will you see a company brochure written in both English and Arabic, but that is what you’ll find with the Julimar Lumber marketing material. Since starting their sawmill in Brookfield, Nova Scotia in 1993, the company has success-fully developed a market for rough, green lumber in the Middle East, in countries such as Egypt, Saudi Arabia, the United Arab Emirates, and, on a more regional basis, in Spain. Their success as lumber exporters has not gone unnoticed—they received an Export Achievement Award from the Nova Scotia government in 1996.

Their business savvy has directed them more towards North American markets at the moment, but they continue to keep Middle Eastern customers supplied and satisfied. Once North American lumber prices improved in mid-1996, the company shifted gears and the United States and Canada became Julimar’s main market. Because Nova Scotia is a non-softwood lumber quota province, Julimar Lumber can ship as much lumber as it can produce to the United States.

The sawmill itself is a mixture of new and used equipment. It operates with 65 employees working two shifts, five days a week, with a strong emphasis on regular preventive maintenance on equipment.

This year, the sawmill will produce between 28 and 30 million board feet of dimension lumber, the vast majority derived from spruce. One design advantage to Julimar’s sawmill is the ability to switch from metric to imperial measures. Because the Middle East works on metric units, the company promotes itself to its customers as being the only sawmill east of Montreal capable of manufacturing metric lumber. But with the growth of markets in North America, the sawmill also needed to supply lumber in imperial units.

"We’re computerized here," says Terry Saleh. "Within an hour, we can switch from metric to imperial sawmilling."

With their solid business background and business interests on four continents, the owners took advantage of their exporting experience when lumber prices softened last year. In addition to North American markets, they also shipped lumber to Cuba and increased sales to their roots in the Middle East. Saleh refers to the Middle East as their "second exit" strategy.

"That area is always in need of lumber," says Saleh. "They have 300 million people and they don’t have many trees there. They have lots of projects, and lots of oil revenue." The lumber is not used for building houses, however, which is why rough green lumber suits the market. It is used mostly for concrete forming, as well as for some light manufacturing.

Julimar’s owners initially became interested in producing lumber because of their background as lumber exporters. They had already developed a number of business contacts for lumber worldwide, but had trouble obtaining the kind of terms they needed from Canadian sawmills for product delivery. For example, larger sawmills were not interested in half-million dollar orders, and smaller sawmills wanted cash in advance and were not capable of producing lumber in metric units.

Realizing that their own lumber manufacturing knowledge was limited, the owners conducted a feasibility study as to where to locate a sawmill capable of producing metric lumber, taking into account availability of raw material, labour, and shipping costs. Saleh says they chose Nova Scotia because of access to Halifax, with its year-round port.

They also hired individuals with sawmilling experience and commissioned companies with the ability to design an appropriate sawmill.

Saleh says their first three years in business were spent shipping lumber exclusively to the Middle East and resulted in huge growth. For example, sales jumped from $400,000 in 1994 to $5 million in 1995. Once they began shipping to North American markets, their sales improved again. Sales from 1997 to 1998 grew by 20 percent, to $12 million. The only barrier they encountered during their early years was arranging regular shipping to the Middle East. When the national Saudi Arabian shipping line started sending container ships to Halifax every two weeks, that problem was solved.

The sawmill itself is a mixture of new and used equipment. It operates with 65 employees working two shifts, five days a week, with a strong emphasis on regular preventive maintenance on equipment. Equipment receives regular maintenance overnight so that when the morning shift arrives, the mill is ready for production.

Due to Nova Scotia’s unique wood ownership situation—with about 80 per cent of the wood held on private woodlots— Julimar Lumber has about 50 suppliers. They also have a wood exchange program with pulp producers Kimberly Clark and Bowater Mercey.

Most of the logs arriving in Julimar’s yard are cut to length, but they also have a slasher to deal with a small quantity of tree length material. A loader operator feeds the automatic step feeder that leads into the debarking station. The debarker operator chooses whether a log should enter the 30 inch Forano debarker, continuing on to the Forano carriage, or to the 18 inch debarker leading to a PME chip-per canter and a Forano bull edger. Julimar has installed an additional mechanism to their chipper canter manufactured by Cardinal to make it faster and more efficient. It can also accept wood down to a three-inch diameter.

The carriage line will produce lumber primarily in 2X8 to 2X12 dimensions. Once boards exit the edger, operators can redirect those that require further manufacturing to a resaw and board edger line sup-plied by PHL. The pieces then recirculate back to the trimmer, and finally to the green chain where they are stacked manually.

Julimar Lumber achieves excellent lumber quality. About 90 percent of its lumber is #1 or #2 according to the National Lumber Grading Authority. They also make the most of their byproducts, with chips shipped primarily to their wood exchange partners, and sawdust and bark sold to other local businesses.

The company’s main focus now is to expand into value added products. This summer, they intend to develop the capability to dry and plane lumber. This will either take the form of a kiln purchase for their Brookfield site, or acquisition of another property located nearby that already has kilns and wood remanufacturing equipment in place.

"We have done well in a short time, and the shareholders have received some return on their investment," says Saleh. "We are now gearing up for expansion to take advantage of value added."

Given the successful track record of the company’s founders, it is likely that Julimar Lumber’s shareholders can expect increased returns on their investments.