international business managemnt

Strategic Position and Future Growth Opportunities

Annie Lee, Alyssia Liu, Eric Chen, Colin Smith, Drew Kosturos, and Stephanie Chen

1 Strategic Position

2 Growth Challenges

3 Recommendation

4 Financial Analysis

5 Conclusion

Agenda

Top Line Performance

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Strengths ● High operational efficiency ● Proximity to customer base ● Partial in-house wood supply ● Sustainability expertise ● Technologically advanced plant

Opportunities ● Expanding foreign sales ● Expanding foreign production ● Expanding local production

capabilities ● Increasing operational efficiency

Threats ● Global presence of low-cost foreign

players ● Lagging demand domestically in

Europe ● Exposure to environmental effects

Weaknesses ● Reliance on foreign wood supply ● Reliance on European market: 83%

of sales ● High cost of doing business in

Portugal

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Assessing Strategic Positioning

In 2015, Celbi paid off 345 MEUR out of 745 MEUR total long-term debt. The company is ready for further expansion.

Reliance on European Markets

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Internal Market Factors: ● Stagnant pulp demand:

1.12% expected growth ● Limited natural resources ● Social and political pressure

to improve sustainability

External Market Factors: ● Increase in natural resources

due to deregulation ● Increasing local competition

from foreign producers

European markets face

stagnant growth and increasing

imports

Rapidly expanding demand State supported

sustainability movement Clear path to entry into

foreign country

Properties of an attractive foreign market

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Problem

Stagnating revenue growth due to overreliance on saturated European market

Solution

Diversify revenue sources through foreign expansion in growth markets

Exportable Assets

● Technological and operational know-how

● Sustainability expertise

Foundation of future growth

Assuring Future Growth

Identifying a Growth Leader

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Local Advantages

Eucalyptus trees grown across China

Multiple provinces with necessary infrastructure and raw materials

Government demand for sustainable goods

Potential Threats

No knowledge of local industry

Lack scale economies

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Chinese Pulp Industry

Recommendation: Build Chinese pulp production plant

with established local partner

Impacts of Implementation

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Total Plant Cost 600-700 MEUR

Total Plant Capacity 600-800 thousand tons

Celbi Capital Spending 300-350 MEUR, loan and bond financed

Revenue Growth 300-400 thousand tons of pulp at €800, 240-320 MEUR/yr

Plan Realization Time 2-5 years, including construction and customer acquisition

Market Growth Rate High local market demand growth ~ 5%/yr

Country Risk Premium Risks accounted for in Financial Analysis DCF model

Potential PartnersMid-sized company

(.5M - 1.5M ton/yr)

Complete projects

on budget High

integrity

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

A local partner will provide industry knowledge, oversee on the ground operations and lower entrance costs

Vetting process should ensure that partner company exhibits desired

characteristics

Joint-Venture Company Qualities

Innovation

Coordination

SharingOpening Up

Green Development

The CPC has vowed to build a “beautiful China” by “prioritising ecological progress and incorporating it into all aspects and the whole process of advancing economic, political, cultural and social progress.”

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

China’s 5 Year Plan - Environmental Protection

Risk Assessment

Losing Managerial Control/IP

Governmental Interference

Macroeconomic Conditions

Creating a Competitor

Perceived threat

Reality

Vet JV partner, negotiate control of “seal”, and general manager of project

Highly unlikely to occur for mid-sized

company in low priority industry

Pulp and tissue demand is

inelastic, market price affects entire

industry

Transportation costs would make

competition in home market

unrealistic

The risks of the project can either be overcome with proper diligence or are not project dependant

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Projected Future Returns (DCF Model)

Firm Value: €693 million to €926 million

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Financial Analysis (Project DCF Model)

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion

Celbi has performed well, but growth in current markets is uncertain

To assure future prosperity, Celbi must expand into a high-growth region

We believe building a plant in China with a local partner will realize top line growth

for the decade to come

Conclusion

Questions?

Appendix

Growth ChallengesStrategic Position Financial AnalysisRecommendation Conclusion