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26 I Cover story bne March 2021
Photos: www.segezha-group.com
to go after high value-added and high margin options,” says Aliyev.
One of the most important value-added products is cross-laminated timber (CLT) panels, which are used in construction in place of concrete. Segezha has a new CLT plant that has just come online this year.
All in all, Segezha plans to continue to invest in value-accretive projects, and it has delivered an internal rate of return (IRR) of above 25% on all completed investment projects.
“We are still in the main growth phase of the company’s life,” says Aliyev.
Global player
Aliyev says Segezha likes to think of itself as a global company, even if its raw material resource is in Russia.
“About 70-75% of our revenue came from exports in 2019, to over 100 countries, so that makes us a truly international company,” says Aliyev.
The timber business is a global one, as the bulk of the world’s soft wood that is ideal for making paper (the fibres in soft wood are longer than those in the hard wood that is found in Southeast Asia and Latin America).
Russia accounts for 70% of the world’s boreal forests and 25% of the world's entire forest resources with the bulk of the rest found in Scandinavia and Canada.
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Segezha competes directly with the Scandinavian companies on the European market, but they have already developed almost all of their available forests, so their resources are tapped out and they are struggling to grow production volumes any more.
Canada is a big player too, with plenty of undeveloped forest in reserve, but as transport costs play a significant role in the paper and pulp business, the companies there tend to focus on the large American market south of the border.
Because of Russia’s size it has several markets that are within easy striking distance, including Europe, North
“Paper is partly a commodities market, but within the business the different grade and quality of paper is also important,” says Aliyev. “We have found that office print paper and newsprint demands have fallen, but demand
for kraft paper [paper for sacks] and packaging has gone up... In the last 3-4 years the demand for consumer packaging has gone up enormously.”
As retail is rapidly going online and home delivery is becoming the norm, the amount of packaging in use is soaring. And the same is true in Russia. The demand for packaging started to rise rapidly in Moscow and St Petersburg, but Aliyev says it is now growing rapidly across the whole of Russia. This year,
“About 70-75% of our revenue came from exports in 2019, to over 100 countries, so that makes us a truly international company”
Africa and the Middle East, and on to the whole of China and Southeast Asia – all of which have a strong and steady demand for paper.
The demand for paper is still growing steadily, although the nature of the market is changing fast, driven by the digitalisation of economies around the world.
Segezha is building five packaging plants within a 30-km radius around Moscow to cover a large portion of the city’s consumer packaging needs.
“Russia is not the key market for us,
but it is our original domicile, and we take pride in servicing it as a leading player in the market for paper sacks, unbleached sack paper and sawn timber