Federal Republic of Germany
Fax: (8035) 805 98
Incorporated: 1970 as Papierwerke Waldhof-Aschaffenburg AG
Sales: DM3.77 billion (US$2.52 billion)
Stock Exchange: Frankfurt
The PWA Group is Germany’s largest manufacturer of pulp, paper, and paper products. Producing 600,000 tons of pulp, 1.3 million tons of paper and 650,000 tons of paper-based products per year, the group is the fifth-largest paper producer in Europe. The PWA Group was formed in 1970 by the merger of two large German pulp and paper companies, Zellstoffabrik Waldhof AG and Aschaffenburger Zellstoffwerke AG. The group is 40% owned by Bayernwerk, a south German energy company owned by energy group VIAG and the Bavarian government; a 10% stake is held by the Bayerische Hypotheken-und Wechsel-Bank.
The group consists of four divisions, each of which is run independently by a subsidiary company, while the parent organization decides on overall, long-term group strategy. Graphic Papers, headed by PWA Grafische Papiere GmbH, at Raubling, is the largest division, accounting for 44% of group sales in 1989. Subsidiaries in this division produce printing, office, and copy papers at sites in Miesbach and Stockstadt, Germany, and Hallein, Austria. The hygienic papers division, headed by PWA Waldhof GmbH, at Mannheim, incorporates manufacturers of tissue toilet paper, paper towels, and handkerchiefs, located in Germany, France, the United Kingdom, and Belgium. This division accounted for 24% of 1989 sales. PWA Industriepapier GmbH, at Raubling, heads the division concerned with the manufacture of corrugated case materials and packaging, with 14 production sites in Germany, representing 20% of 1989 sales. Smallest in size, with 10% of sales, is the specialty papers division, which produces decor papers for surface finishing in the furniture industry, and coated papers, with subsidiaries at Unterkochen and Krefeld as well as in Spain and Belgium. Vertical integration of production is a central feature of the PWA Group; all of the pulp produced by PWA is made into paper within the group, and 35% of this paper is converted into consumer products by PWA’s subsidiaries. Exports—primarily to European Economic Community (EEC) countries—account for around 50% of group sales.
The two companies which combined to form PWA were founded in the second half of the 19th century as pulp manufacturers. Economy of scale is a significant factor in pulp production, and the two companies’ strategy in the first phase of their development, up to World War II, was primarily directed towards increasing production capacity and extending their activities into areas with a good supply of wood. At this stage they had little interest in forward integration into paper production. They did not feel at risk of competition from paper producers, who tended to have low production levels and were unlikely to move into the capital-intensive business of pulp manufacture.
Aschaffenburger Zellstoffwerke AG was founded on May 12, 1872, as Aktiengesellschaft für Maschinenpapier-Zellstoff-Fabrikation. The company began by producing paper from its own output of sodium pulp and struggled in its early years with production problems and financial difficulties. Only in 1887, when it switched to sulfate pulp production, did the company begin to maker profits. After the two mills at Aschaf-fenburg had been extended, increased water requirements led the company to build another pulp mill at Stockstadt, five kilometers farther down the Main River, in 1897-1898. Pulp manufacturers at Walsum, lower Rhine, and at Memel, now in the USSR, were acquired in 1903 and 1905. The company purchased forest land in Russia, and an office was established at St. Petersburg. Between 1914 and 1929 Aschaffenburger Zellstoffwerke expanded significantly. The work force grew from 2,950 to 4,551. Production levels of pulp were increased from 109,000 tons to 183,000 tons; paper production rose to 41,000 tons. Spirit production, introduced during this period, amounted to 59,000 hectoliters in 1929. Sales rose from 26 million reichsmarks in 1914 to 65 million reichsmarks in 1929.
Further acquisitions followed: Hoesch & Co., a pulp producer at Pirna, in the postwar German Democratic Republic, was acquired in 1931, and Freiberger Papierfabrik, a pulp and paper manufacturer at Weissenborn—also in the German Democratic Republic—was acquired in 1937. In 1936 the company’s administrative headquarters moved to Berlin and the name was changed to Aschaffenburger Zellstoffwerke AG. A pulp mill at Strasbourg and Vereinigte Papierwarenfabriken GmbH, a Munich paper merchant and converter, were acquired in 1942. The following year saw the beginnings of diversification into pulp by-products, with the establishment of a yeast factory at Stockstadt. In 1944-1945, the company’s works and subsidiaries suffered extensive wartime damage and the Berlin headquarters were destroyed.
Zellstoffabrik Waldhof AG was founded in Mannheim in 1884, by Rudolf Christian Haas, Carl Haas, and Carl Clemm. Production of pulp began in 1885, with an initial capacity of 20 tons per day. In the following 25 years the capacity of the mill was increased tenfold. Zellstoffabrik Waldhof concentrated from the beginning on the manufacture of bleached pulp produced by the Ritter-Kellner method. As the demand for bleached pulp soared, the company became Aschaffenburger Zellstoffwerke’s main competitor in south Germany. When the Aschaffenburg company planned its new mill at Stockstadt in 1896-1897, Zellstoffabrik Waldhof suggested that this might be a joint venture; however, the older company was prepared to cooperate only in sales and distribution, not in production.
During the period before World War II, Zellstoffabrik Waldhof expanded through internal growth and acquisition, becoming larger than its longer-established rival. In 1893, paper production began at Mannheim. A pulp factory was built at Pirna, now in the USSR, in 1900—the factory was destroyed in 1915—and a pulp manufacturer at Tilsit, now in the USSR, was acquired in 1907. A Norwegian subsidiary was acquired in 1908. Forest land was purchased in Bohemia and Russia, amounting to approximately 150,000 hectares in 1910. Further acquisitions included the Simonius’sche Cellulosefabriken AG at Wangen in 1917, with pulp and paper factories and wood cutting; the pulp factories at Cosel-Oderhafen in 1921; and Ragnit—now in the USSR—in 1924; a paper manufacturer at Unterkochen in 1924; and a paper mill at Pforzheim in 1931. Subsidiaries were also established at Kehlheim—a pulp mill, Niederbayerische Cellulosewerke, in 1925; and in Finland—the Oy Waldhof Ab pulp mill at Kexholm, in 1928. The company’s distribution subsidiary at Hamburg was founded in 1925 and extended with branches in Germany and abroad. The acquisition of Natronzellstoff-und Papierfabriken AG in Berlin in 1938 brought pulp and paper factories in Germany—Altdamm, Krappitz, Priebus, Oker; Austria; Czechoslovakia; Hungary; Romania; and Yugoslavia. In the 1920s and 1930s Zellstoffabrik Waldhof was one of the leading European manufacturers of paper and pulp. In 1931 the administrative headquarters were moved from Mannheim to Berlin, and by 1939 the company had a work force of more than 11,000 and an annual turnover of 1.45 billion reichsmarks.
As World War II ended, both companies incurred substantial losses through bomb damage, decommissioning, and the subsequent loss of territories and foreign investments. Aschaffen-burger Zellstoffwerke lost all of its foreign subsidiaries, including the pulp mill at Memel, and works at Pirna, Heide-nau, and Weissenborn in the eastern zone. The headquarters of the company moved to Redenfelden. The remaining factories were at Aschaffenburg—pulp, paper, and spirit; Stockstadt— pulp, spirit, and yeast; Walsum—pulp, paper, spirit, and other by-products; Redenfelden—pulp, paper, and spirit; Miesbach— wood cutting and paper; and Hoven—paper. Pharmazell GmbH in Raubling, producing chemical and pharmaceutical products, was founded in 1945. In the years following the war the company concentrated on rebuilding the factories which had suffered bomb damage and making up lost capacity with the help of reconstruction loans. Production levels were raised substantially but remained behind prewar levels: in 1950 the company produced 136,000 tons of pulp, 40,000 tons of paper, and 78,000 hectoliters of spirit. This represented 27% of the pulp and 3.7% of the paper produced in West Germany during that year. Exports accounted for 12% of turnover in 1950 and the company recorded a pretax profit of DM2.5 million after losses of DM2.2 million in the previous year and seven years without dividends for shareholders. The work force at this stage numbered 4,500—24% of workers were classified as Heimatvertriebene, expelled from Eastern Europe and the eastern zone of Germany.
Zellstoffabrik Waldhof lost works at Tilsit, Ragnit, Cosel, Oberleschen, and Johannesmuhle, representing more than half of the group’s prewar capacity for pulp, paper, and spirit production. All foreign subsidiaries and shareholdings were lost. The number of employees fell to 5,700 in 1948, and annual turnover was halved. Yet reconstruction and modernization soon led to improved results: in 1950, with a work force of 6,000, turnover had exceeded prewar levels and the company recorded a profit of DM2.1 million. The company headquarters moved to Wiesbaden in 1947.
Postwar reconstruction and restructuring combined with new economic circumstances to effect a fundamental change of strategy in both companies. Their competitive positions deteriorated in relation to the increasingly powerful Scandinavian producers, who had the advantage of being located near their raw material sources, and were favored by the liberalization of foreign trade in Germany. Declining sales forced both Aschaf-fenburger Zellstoffwerke and Zellstoffabrik Waldhof to place increasing emphasis on paper production: pulp production levels at both companies remained more or less static in the postwar years, while paper production increased. New products were also introduced, with the aim of integrating pulp into a diversified production base, providing a guaranteed outlet for the initial product. Product diversification at Zellstoffabrik Waldhof began with the manufacture of pharmaceutical products, established in 1949. In 1954, Aschaffenburger Zellstoffwerke acquired Papierfabrik Salach, with a paper production capacity of around 9,000 tons per year: this was the company’s first significant move to extend the conversion of its own pulp. By the time of the merger in 1970, the policy of diversification had resulted in a broadly based combined product palette, encompassing a number of pulp-types—bleached and unbleached, wood-pulps, and wood-free pulps; pulp by-products-spirit, yeast, and pharmaceutical products; packing papers, corrugated papers, writing papers, stationery products, printed papers, specialty papers, milk cartons, tissue papers, carbon papers, plastic sacks, and tissue products. The number of production sites was correspondingly large, contributing to high costs which hampered the effective development of individual product sectors. The large range of products also led to difficulties for both companies in establishing and carrying out a coherent group strategy. It was the dramatic deterioration in profitability resulting from these factors which prompted the merger of the two groups in 1970. Shares in Aschaffenburger Zellstoffwerke were exchanged for shares in the new company, Papierwerke Waldhof-Aschaffenburg AG at a rate of three for two; shares in Zellstoffabrik Waldhof were exchanged at a rate of one for one.
The newly formed company, renamed PWA Papierwerke Waldhof-Aschaffenburg AG in 1974, decided to concentrate on the integrated production of mass papers, reducing its range of activities and the number of production sites. The results of this strategy have been decisive: between 1970 and 1988 the group’s paper production increased by 150%, while at the same time the number of paper machines was reduced by 40% and the output of each machine was increased fourfold. The total of 26 products covered by the group in 1970 was reduced to six basic products in 1988—two types of bleached pulp, tissue wadding, packing papers, graphic papers, and tissue products.
The implementation of the new strategy took effect from 1973, when the group was reorganized into market-oriented product divisions. In 1974 the group’s corrugated paper activities were formed into a distinct subsidiary, Zewawell AG. The movement towards the group’s present structure was consolidated in 1977 and 1978, when the main product divisions were separated into independent companies within the parent organization: PWA Grafische Papiere, graphic papers; Bayerische Zellstoff, nonwood pulp; PWA Waldhof, pulp; PWA Industriepapier, packing papers; Apura GmbH, tissue products; PWA Dekor, decor and specialty papers; and Papierwaren Fleischer, household papers. Results throughout the 1970s were depressed by the rationalization measures undertaken; towards the end of the decade there were indications of a return to profitability. Group sales amounted to DM1.4 billion in 1978, with a pretax loss of DM19 million; sales in 1980 reached DM2.3 billion with a pretax profit of DM32 billion.
The restructuring of PWA’s activities continued in the 1980s. Paper products manufacturers at Hoven and Eislingen were closed in 1982. The group sold its packaging subsidiary, Natronag, at Goslar in 1983, and printers Efnadruck GmbH and Offset Gerhard Kaiser GmbH in 1984. Bayerische Zellstoff, a pulp producer based at Kehlheim, was sold in 1987. Wifstavarfs, a joint venture with Svenska Cellulosa to manufacture fine papers in Sweden, was established in 1982; PWA sold its 41% share of the project in 1987. The company also strengthened its core divisions by acquisitions during this decade. A 40% shareholding in Sept, a French sanitary paper products manufacturer, was purchased in 1986. In 1988, PWA acquired James McNaughton Ltd., a U.K. paper merchant, after purchasing an initial shareholding in 1986, and 76% of the Spanish decor paper manufacturer Papelera Calparsoro SA. In mid-1989, PWA Waldhof acquired the hygienic paper operations of Holmen S.A., Sweden, including central European operations as well as production facilities in Belgium and the United Kingdom. The specialty papers division was extended by the 1989 acquisitions of Feikes & Sohn KG—a coated papers manufacturer at Krefeld—and Belgian coatings and laminates manufacturer Transpac.
After static sales levels—around DM2 billion—and poor profitability in the early 1980s, sales increased from DM2.8 billion in 1986 to DM3.8 billion in 1989, and were projected to exceed DM4 billion in 1990, with more than 50% attributable to exports. Profits for 1989, after tax, reached DM201 million.
The paper industry in Europe is becoming increasingly concentrated, with a number of large acquisitions in recent years consolidating the leading position of the Scandinavian producers. However, a glance at the global situation confirms that there is still a long way to go; of the world’s 20 largest paper companies, 18 are based outside Europe, almost all of these in Japan and the United States. In this context, PWA faces the challenge of maintaining its position in an ever more competitive marketplace, which will be dominated increasingly by large-scale producers. Having recently missed the opportunity to acquire Feldmühle Nobel’s tissue paper activities, which were sold to the Scott Paper Company in the United States, PWA is looking for other opportunities to expand, as chairman Willi Klein-Gunnewyk indicated in July 1990. Expansion and modernization of the group’s existing facilities are also planned. PWA is implementing an investment program worth DM1.1 billion, to last until 1993.
PWA Grafische Papiere GmbH; Papier-Verarbeitungs-und Vertriebs-GmbH; Systemform Datenbelege GmbH; PWA Waldhof GmbH; Apura GmbH; Zewawell AG & Co. KG; PWA Industriepapier GmbH; Innwell GmbH; PWA Dekor GmbH; PWA Kunststoff GmbH; Feikes Papierbeschichtung GmbH; PWA Mabelpap S.A. (Belgium); PWA Waldhof UK Ltd.; PWA Waldhof France S.A.; PWA-K Duffel N.V. (Belgium); Novacard GmbH (60%); Zewathener GmbH (51%); Hallein Papier AG (Austria, 75%); James McNaughton Paper Group Ltd. (U.K., 85%); Papelera Calparsoro S.A. (Spain, 76%).
Klein-Gunnewyk, Willi, and Bernhard Greubel, “Strategie und Organisation: Dezentrale Organisation und Strategie im PWA Konzern,” ZFO 4, 1989; “Die früheren Geschäftsbeziehimgen von PWA nach Osteuropa,” Aktuell, January 1990.