“The challenges are big, but not insurmountable”

Mr. Pfeifer, how do you experience the current economic environment for the timber industry?

Michael Pfeifer: We have come from some very good years to a situation that has definitely become more difficult. Based on known problems, such as high interest rates, inflation and a reduced willingness to invest, I expect that the next two to two and a half years will remain difficult. We have adapted or will adapt our production accordingly. Our pallet block and packaging lumber sales are an important indicator for us. When they are decreasing, one can assume that the economy will weaken over the medium to long term.

At the moment, demand for pallets is much weaker and, as a result, fewer pallets are produced than in previous years. The timber industry is feeling the effects of the sluggish economy primarily through the hard-hit construction industry. Pfeifer’s wide product portfolio once again proves to be an advantage. That’s why I’m optimistic about the future. The challenges are big, but not insurmountable.

How are your timber construction customers doing? What is the mood like?

Michael Pfeifer: The timber construction sector has accounted for a growing share of Pfeifer’s sales volume in recent years. Our customers got through the pandemic quite well. After some initial problems caused by the lockdowns and supply chain disruptions, the industry made a great effort to tackle these issues and, from the second half of 2022 onwards, there were no longer any relevant bottlenecks.

At the beginning of 2023, we saw that timber construction companies had relatively long order lead times of six to eight months, especially in German-speaking countries. Compared to last year, when timber construction companies were often completely “sold out”, that is a small dent, but no reason to panic. The ongoing decrease in the number of building permits is creating a challenging situation for 2024. Nevertheless, sentiment is mostly positive and optimistic in our core markets.

What are the biggest challenges in the timber construction sector?

Michael Pfeifer: High interest rates, stricter rules for granting loans, great uncertainty on the market and persistently high raw material costs for some construction products are resulting in a noticeable decrease in investments. Fluctuating material costs and bureaucracy in the form of slow permitting processes also add to the unpredictability. Nevertheless, we think that the timber construction sector will have a rosy future. Leading experts see timber constructions as an important building block for tackling climate change, and this opens up new opportunities for all industry players. To seize these opportunities, we should increasingly promote digitalization, prefabrication and circular construction. This way, we can respond to customers’ needs even more efficiently and competitively.

How do you assess the development of prices and the availability of log wood?

Michael Pfeifer: A secure log supply forms the basis for production and added value in the timber industry. It is also a key factor of Pfeifer’s consistently high ability to deliver. That’s why we have to maintain and expand our purchasing relationships – regardless of economy-related fluctuations in demand. Of course, we also want to process as much regional wood as possible in our sawmills. After all, the stock of wood in Central European forests keeps growing each year and secures availability for future generations, too.

At the moment, we are also doing preparatory work for log transport over longer distances, for example through our own railway siding in Lauterbach, which will enable us to help quickly when there is damaged wood that needs to be processed after a calamity.

What prompted us to go to Finland at the end of 2022 was the top quality and availability of the raw material there as well as the predictable log price.

How is the collaboration with your new partners in the north going?

Michael Pfeifer: We are currently in the process of integrating our new Finnish production sites into Pfeifer’s corporate cosmos. We are pleased to be able to offer our customers a wider range of products. The high-quality raw material is processed not only into lumber and glue-laminated timber, but also into pressure-impregnated wood, profiled wood, terrace flooring and animal bedding at the Finnish production sites. This way, we are now even more broadly positioned, and we can also serve our customers better and tap into new markets. The Pfeifer Group as a whole currently has a lumber production capacity of 3 million m³, which makes us the third largest sawmill group in Europe and the number 10 at a global level. I also see great potential in the manufacture of processed products in Finland.

Are there any plans for further expansion?

Michael Pfeifer: Speaking for the industry as a whole, I expect further takeovers in Scandinavia. The US is also being closely watched by Central European timber companies since that market could offer attractive opportunities. As for Pfeifer, “growth with foresight” is a core element of our strategy. Pölkky was not our last acquisition. In order to ensure the success of the Pfeifer Group, we are focusing on increasing efficiency in all areas of the company, while promoting internationalization and – under ideal conditions – further expansion.

We are currently looking to expand our international sales business and are looking for suitable partners.

Has the logistics situation improved?

Michael Pfeifer: The challenges which have become more difficult due to Covid-19 are still present. For us, logistics is no longer a cost factor but a bottleneck. We try to respond to the uncertainties in the logistics industry by introducing logistics controlling and optimizing systems for our in-house transport network. Due to the volatility on the freight transport market, low rates can currently be achieved despite high costs for the freight forwarders.

When it comes to making the shift from road to rail, we are struggling with increased costs and a shortage of rail freight capacities. Freight rates for containers keep falling and the situation in the ports is easing.

How does Pfeifer handle the topic of sustainability?

Michael Pfeifer: Ecological sustainability will be a very important building block in shaping a successful future for Pfeifer. We are already calling for ecologically sustainable action in all company areas and processes. We have anchored this as an integral part of every manager’s responsibility. In addition, we encourage all employees to actively promote ecological sustainability within the company and to support the measures we take in this context. In order to make our efforts visible to our customers and partners, Pfeifer is voluntarily going through the EcoVadis sustainability rating process to create transparency in matters of sustainability and corporate social responsibility.

And what significance does innovation have?

Michael Pfeifer: At Pfeifer, we are constantly thinking about the competitiveness of our products, but also about the huge potential of wood as a raw material and CO2 “storage medium”. At our Innovation Hub in Innsbruck, we focus exclusively on identifying and anticipating promising trends. In research, for example, we are keeping an eye on where relevant technologies are being developed and we always try to consider the transfer into our world, the world of an industrial company.

At the same time, we specifically look for start-ups, evaluate them and sometimes make an investment or enter into a cooperation. The hybrid innovation team, which consists of Pfeifer employees, acts as a bridge into the company. Our employees support all processes in the projects and incorporate new knowledge into their work. This way, the vision of a Timber Valley is gradually taking shape.