Juken NZ looks to halve Gisborne mill staff in bid to drive profitability

Juken New Zealand, a unit of Japan's WoodOne Ltd, is consulting workers at its Gisborne wood-processing mill on a plan that may see it halve the mill's workforce as it struggles to return to profitability in a highly competitive market.

The Juken mill at Matawhero opened in 1994 and employs some 200 full-time employees. It is one of four Juken mills and processes radiata pine to make solid wood and engineered wood products such as plywood, laminated veneer lumber and SLVL (veneer), mainly for the Japanese housing market.

Juken general manager Dave Hilliard said there's been a significant drop in demand from Juken's main export market in Japan for plywood and structural LVL building products in the past few years, which has seen these parts of Juken's New Zealand processing business operating at a loss. To address that, Juken NZ wants to stop plywood and LVL production at the mill and scale back veneer manufacturing, cutting the factory's full-time workforce to about 100.

"The Japanese housing market has been in decline and future demand for these products is not expected to improve because of the ageing population in Japan," he said. He also said the company's plywood is increasingly unable to compete in the domestic and international markets against product out of large-scale wood processing plants from the likes of China and South America.

The latest accounts filed to the Companies Office show Juken NZ reported a profit of $31.1 million in the year ended March 31, 2017 on revenue of $220.4 million with the bottom line flattered by revaluation gains of almost $40 million and attracting a tax bill of $11.7 million. That compared to a profit of $5.4 million on revenue of $219.9 million in the 2016 financial year when revaluation gains were more muted. Gross profit was relatively flat in the 2017 year at $42.7 million, with a greater proportion of sales to related parties in the period.

Juken NZ's Hilliard said "significant investment would be required to increase to a scale to compete internationally. At this time, there's just not the log or manufacturing volume of appropriate quality and price to justify that investment."

The local holding company's $343.2 million of plant and machinery was valued at $58.3 million as at March 31, 2017 after accumulated depreciation and impairment charges.

Juken NZ's proposal to staff would see the mills return to profitability to keep high-value wood processing jobs and investment in Gisborne and Wairarapa by refocusing on value-add products where there's strong customer demand and Juken has a competitive advantage, including its premium sawn clearwood products.

The company is also changing what it makes at its Wairarapa mill, increasing production of its 'J-frame' framing for the New Zealand housing and construction market and decreasing the specialist products made for the Japanese building market. These changes won't result in job losses for any of Juken's 222 permanent staff in Wairarapa, Hilliard said.

In a separate statement, First Union president Robert Reid said the move was a "bitter blow" for Gisborne workers and the community. "JNL is the only significant wood processor left in Gisborne and its downsizing is a market failure," he said.

The First and E tu unions are meeting with members to figure out to respond and have called on the government "to immediately establish a task force of its agencies with the industry, community and union leaders to implement a wood plan for Gisborne," Reid said.

The staff consultation period will run for two weeks. Juken will then consider feedback before making a final decision.

Hilliard said the proposed changes would have no impact on Juken's forestry operations. Juken has over 30,000 hectares of sustainably managed and certified plantation forests in East Coast and Wairarapa.

(BusinessDesk)