Sumitomo takes leap over Ditch

By PAM GRAHAM

Nineteen years after Sumitomo Forestry of Japan invested in medium-density fibreboard plants in New Zealand it has expanded into Australia for the first time.

The purchase of a $86 million MDF plant in Wangaratta, Victoria, built by a Malaysian businessman in 1995, was settled over Christmas, says Murray Sturgeon, the managing director of Nelson Pine Industries.

Sturgeon, made an ONZM in the New Year's honours list, was in Australia last week bedding down the plant investment.

He will manage the plant and Nelson Pine Industries business. Nelson Pine has been a full subsidiary of Sumitomo Forestry for 10 years.

The Australian plant adds 120,000cu m of capacity a year to Nelson's 400,000cu m. It will service Nelson Pine's Australian customers. The freed output from Nelson will be marketed in Asia.

"To be internationally competitive you have to have scale and capacity," Sturgeon said.

The marriage of foreign investor and local management has stood the test of time.

In 1984, Newmans Group and Odlins Timber invited Sumitomo to join them in a business to process wood chips into MDF, a pressed wood-fibre building material harder than particle board but lighter than hardboad.

The 30 per cent shareholder agreed to market 43 per cent of the output in Japan, buying some of the output for its own house building and furniture businesses. "The marketing contract certainly gave a comfort level to the lenders," said Sturgeon.

There was also comfort on technical issues because MDF had been manufactured in New Zealand since 1976.

Ownership changes led to the reconfiguring of the business to a 50:50 joint venture with Newmans. Eventually, early in 1993, Sumitomo took full ownership.

Sturgeon said the business worked well as a joint venture.

"The New Zealand partners understood the labour laws, resource management laws and tax laws."

Sumitomo accepted that the wood resource, technology and management was in Nelson.

"They felt pretty comfortable about that," Sturgeon said. "They rely on us to run the business as if it was our business."

Profits are not disclosed, but are achieved on an asset base of $350 million-$380 million that pumps $220 million a year into the Nelson economy.

"The Japanese take a long-term view that is shared and promoted by me to them," Sturgeon said.

Their demands for quality had been a good manufacturing discipline.

The structure cut out middle men in the Japanese supply chain.

"When you sell to the shareholder who owns that infrastructure, you have the opportunity for your technical people to talk to the end user and develop the product to suit."

Even pianos. Yamahas have parts made from Nelson "golden edged" branded MDF.