In Manufacturing, Plum Creek Sees Reversal of Fortunes

By Beacon Staff

The housing industry continues to lag, but Plum Creek Timber Company has reinvented itself and found a way to begin posting profits in its manufacturing sector again after two years of heavy losses.

The turnaround is largely due to success in niche markets and streamlined operations at the company’s mills and plants, with cross-trained employees proving capable of fulfilling multiple job duties, said Tom Ray, vice president of northwest resources and manufacturing.

According to its 2010 earnings report, Plum Creek’s manufacturing segment reported $24 million in operating profit, a year after reporting $23 million in losses. The 2009 operating loss included $20 million in one-time charges stemming from the segment’s downsizing, the report notes.

In 2008, Plum Creek’s manufacturing lost $44 million, while it posted operating profits of $2 million in 2007 and $22 million in 2006.

The earnings report for the first quarter of 2011 hasn’t been released yet, but Ray is confident the trend of success from 2010 will carry over into this year at the company’s mills and plants. Plum Creek has three operating plants and one sawmill in Northwest Montana, and a remanufacturing plant in Idaho.

“We’re looking at a pretty stable market going in 2011,” Ray said.

Products made at Plum Creek’s medium-density fiberboard plant in Columbia Falls have found success in markets for furniture, architectural doors, various retrofitting necessities and oddities such as store displays.

Specialty plywood from the company’s plywood plants in Evergreen and Columbia Falls is used in doors on freightliner truck trailers and recreational vehicles, among other uses.

“Our strategy over the last few years has been to diversify as much as possible into the industrial, commercial markets, and take items out of residential,” Ray said. “These high-value niche markets have allowed us to reinvent ourselves.”

“If it’s not housing related,” he added, “we’re seeing a pickup in the economy.”

The bulk of Plum Creek’s income continues to come from real estate. In 2010, the company reported $180 million in income from real estate, down from $278 million in 2009. The drop in real estate income offset the increases in manufacturing, timber resources and non-timber resources. Plum Creek’s companywide operating income was $297 million in 2010 and $299 million in 2009.

Ray expects the company’s timber harvesting activity to be “very similar” to last year.

“In May, we can expect the loggers to return to the woods,” he said.

Plum Creek has 700 employees in Montana, Ray said, including 570 in manufacturing. That’s down from 1,070 total in Montana in 2009 and 900 in manufacturing. The company is hiring now for 20 seasonal summer positions and to fill positions left open from attrition. Ray said Plum Creek isn’t currently hiring for new full-time positions.

The Ksanka stud mill was dismantled and the property has been sold, Ray said. The company’s facility in Pablo was dismantled last year and that property is being marketed. The Evergreen stud sawmill and remanufacturing plant is sitting idle.

Just as the company is adapting to new markets, it is also adapting to new operational strategies at its mills and plants, including saving $500,000 a year in electrical usage. Versatile, cross-trained employees allow the company to perform more work with fewer employees.

“We feel good about our business this year,” Ray said. “Our employees are doing a tremendous job. They’ve really helped us adapt. They’ve done a great job.”