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Bisonite touches wood for future growth

Interview - April 30, 2012
PG Bisonite Plc is specialised in the manufacture of particleboard, sawn timber, timber mouldings and surface up-graded particleboard. Managing Director Francis Pindani Nyirenda shares with us his vision for growing the company through investments in technology and by venturing into forestry and door manufacturing
Could you please give us an overview of your company?

Bisonite Zambia Limited is involved in the manufacturing and processing of wood products. We do not, as a company, own any forestry at the moment. We feed from the Zambia Forestry & Forest Industries Corporation (ZAFFICO), which is the sole supplier of soft wood in this country. While we may have some indigenous hard wood in the country, the exotic soft wood is predominantly supplied by ZAFFICO. Currently, we are seeing pressures on ZAFFICO given that the demand seems to be outweighing the supply. The rate at which various companies are harvesting the round wood is not sustainable.

That’s why we are seriously exploring ways to establish our own forestry to compliment what ZAFFICO is supplying. And also it’s one way of putting back into the environment what we have taken out. We have to be seen as a good corporate citizen in terms of trying to reduce the carbon footprint because of environmental degradation and also to guarantee round wood supply to our business.

I would also like to mention that Bisonite is majority owned by the Public Service Pensions Fund (PSPF). My colleague William, my assistant and I serve the PSPF to manage the activities of this investment. However, Bisonite just happens to be one of many investments of our fund portfolio. Currently, we have reached a stage where we have ensured that the business – plant-wise – has been restored, and we are now looking into bringing in strategic partners so that the company can diversify into forestry and civil culture to ensure that the business itself is sustainable. In order to do this, we’ve been exploring various opportunities. We have attended several trade missions to try and attract investment into our business.

With this interview you are providing Bisonite with an opportunity to explain itself to would-be investors who may want to come and invest in this sort of industry in Zambia. Fortunately, most of the equipment that we use is manufactured in Germany, which is the hub of industrial machinery supply. For example, our flaking machine for the particleboard line, even if it’s supplied by Router from Finland, is manufactured in Germany. We had a hydraulic press pump for the particleboard line that we ordered from Belgium, but they had to outsource it from Germany. Everything is coming from Germany, from our couplets and to our moulding machine. So, in terms of support from prospective investment and investors, we believe that those coming from Germany would add more value to our business.

Being the major shareholder in Bisonite, the Fund cannot own too much equity because we need it to ensure that we give the company dimensions to raise capital for it to refurbish the plant so that the plant integrity is restored. Once the plant integrity is restored, it’s easier to attract strategic partners when you have a got a fully-fledged, growing unit as opposed to a business which is not operational. This business that we run is operational, it has the market and that market is infinite. But, we cannot meet all the requirements because our plant is too small. In Zambia, there are only two particleboard manufacturing plants: Bisonite and Wood Processing. Of the two, Bisonite has slightly newer equipment, but our capacity is small. We still have to import products that should be produced within Zambia because we have the capacity. We have abundant land to grow trees. In our industry, we can use both pine and eucalyptus, which is fast growing. Eucalyptus can be used to manufacture particleboard and some timber just like pine, but pine takes more time to grow.

With proper planning, given that these are long term investments, land is easier for us to get considering that our company is owned by the pensioners, the senior citizens. And I‘m aware that the pensions schemes in Germany are very strong and we would like for those who wish to invest in our industry to keep in mind that we seem to be speaking from the same point of view on that aspect. We want to grow our investment for the benefits of all our shareholders, including the pensioners whose funds have been invested there.

At the moment, the Pension Fund owns more than 90% of the shareholding; however we wish to divest this significantly to attract foreign investors. Currently, the Pension Fund is ready to divest as low as 20% or 10% ownership. We would like to leave that side to someone who is used to this sort of business, like a fund manager. Before we could do that, however, we would need to ensure that the business is running properly.

The opportunities that you are pointing out today give a very clear message that Zambia’s potential is there, we just need investments. The President and ministers support this project because they see the value of German investors for Zambia. The German President is coming for a visit and we are sure that many things are going to come from that visit. You were talking about the fact that the company is considering buying more land to meet the supply. Could you please expand on what Bisonite would need from potential investors in order to grow?

Looking ahead, Bisonite would require upgrading its equipment. As an example, our particleboard line is computer controlled, but it’s PLC driven. And we are still using the DOS as opposed to Windows Software so trouble-shooting becomes difficult. If you have a small problem, even something so small like a loose cable, you have to fly somebody out to come and troubleshoot. So upgrading is paramount. Getting new equipment to replace the older equipment that we have now on the line is also important. So, we would want some sort of investor that would bring in new technology and know-how. New technology might even help us to do things better than we are doing now as well as helping us reduce waste.

We could make good proper use of our by-products, sawdust in particular, which we use as an ingredient in the production of particleboard. However, we are not able to use all of the sawdust obviously because of limited capacity.

We need better equipment to upgrade our existing plant and we also need new pieces of equipment like a finger jointing machine that helps to join short planks so that, instead of throwing them away, you can use them. Because if you have a short plank that is less than the necessary five metre long plank, you’ve got off-cuts that you end up just crushing or burning, adding to unnecessary waste. So, if we have the finger jointing machine we would just join the short planks, which would reduce the pressure on the forestry.

The second thing is that if we could get into partnership with an investor who was to come and support our forestry section, it would help reduce the costs of the business because the major cost drivers for our industry is the price of round wood from ZAFFICO. In this industry, we are not the only players, there are very few large players in the industry, but you’ve got more than a thousand small scale saw millers. So the demand is so much that if Bisonite could start its own plantation now, it would be complementing the supplies of ZAFFICO in the next seven to ten years with its own trees as opposed to just continuously pressurizing ZAFFICO. So we need that kind of investment into Bisonite.

You came into your current position about two years ago. At that time, what were the biggest challenges you faced and what were the projects that have been put into motion to re-capitalise the company’s growth?

The biggest challenge that the business faced two or three years ago, to start with, was one continuous machinery breakdown due to inadequate working capital that made it difficult to find spare parts. The other challenge was that Bisonite had an external debt with the PTA Bank, which the major shareholder, the Zambia PSPF, had to pay off. After we paid off the PTA bank debt in full, we concentrated on refurbishing and restoring the plant to an acceptable level. We had to decommission some pieces of equipment that had become obsolete and we brought in new pieces of equipment. We also began to order spare parts from original manufacturers instead of from third party manufacturers so that we had the correct spare parts.

Those are just a few major challenges that we faced. Currently, the logging vehicles and the Benz trucks are very old now. We would want to replace the Mercedes Benz trucks and also maybe acquire two more logging trailers. We had to decommission the logging pieces of equipment that used Deer’s engines, also from Germany. We had to buy two, but they are not enough. At the moment, we literally have to fix forklifts every other day. These things have a large impact on the general productivity of the business.

So the major problem was machine breakdown, but that has been reduced now. More or less, the main production lines have been sorted out, but obviously breakdowns are common in the manufacturing industry. But it’s not like it used to be because, previously, it was a lack of sufficient working capital that prevented procuring proper spares; now we have dealt with that.

But what we need now is to expand, to get new technology to do things better. Also, we need to venture into our own forestry that would require more machinery like new tractors. We also need technical know-how to learn how to operate the new pieces of equipment that will be coming on board. Also we could venture into door manufacturing among other possibilities.

In talking about growth, we have been hovering around 6.3% for the past three years. Our growth rate has been between 0% and maybe 7% or 8% for the last three or four years. As you know, if the economy is growing, one of the many indicators is the construction industry. We have had several inquiries, wherever we are supplying our boards for sealing and construction of timber, for doors. We need to invest in flash door manufacturing equipment. We need that technology now. Those are some of the things we need from investors because we have the raw material ready.

When you started at Bisonite, the company was in dire straits. Since you have been with the company it has been grown tremendously and is now seeking investors. You still have a lot of steps ahead of you, what legacy would you like to leave behind? Where would you like to see Bisonite in the future?

In the next four or five years, I would like to bring Bisonite to the next level. I mean, if it’s running profitably at full capacity, I would want to list it on the Lusaka stock exchange. Once listed, that would be my best legacy. If we can list it, everyone can participate, it’s a pensioners’ company and we can declare dividends to the pensioners. That would be very good.

That’s a very ambitious goal, but you’re on the way. Is there any final message that you would like to communicate about the company to potential investors?

First, I would say that Zambia provides appropriate investment opportunities. Bisonite is such an opportunity, and it is still untapped. At the moment, the investment has been predominantly internal investment by the Zambian PSPF, which now wants to divest some of its equity to foreign investors in order to take it forward.

Secondly, I would want to urge the prospective investors out there not to doubt the investment opportunities that Zambia can provide. The competitive advantage that Bisonite will offer to anyone who wants to hold hands with it, is that it is now owned by the Pensioners of Zambia and it is easy for it to access land for expansion in terms of starting forestry and other subsidiary production lines to the mainstream particleboard line and timber products.
The Pension Fund has managed to turn this business around; it’s now ready to run and it’s a willing partner wanting to seed some of its equity interest into this company along with any investor who would like to come and join hands with us and anyone who wants to enjoy the benefits of owning an investment in Zambia.