The Price Companies: The Price is Right - Energy Executive - RedCoat Publishing - American Executive

The Price Companies: The Price is Right

Energy Executive Spotlight
Written by Eric Slack
Friday, 30 November 2007
President and CEO Dick Carmical describes how this wood processing company has cut its own path to success. As industries mature, finding new avenues for growth can be difficult. Not so at The Price Companies, a forest products company based in Monticello, Ark. “We pride ourselves on challenging the status quo. That gave us a leg up in a market that is fairly low margin,” said Dick Carmical, president and CEO. “Innovation is important, but the fundamentals are the foundation that keeps us going.” Dick Carmical, President and CEO The original JP Price Lumber Company was founded by John Porter Price as a logging and sawmill operation in 1965. Since that time, a company commitment to diversification has helped it become one of the largest companies in the US lumber industry. Logging on Realizing its original focus as a sawmill limited the company’s opportunity to grow, its founder came up with a novel solution. As the sawmill struggled to bring in enough logs to stay busy, Price’s forward thinking had him searching for other business opportunities. Traditionally, the logging industry was involved with two products; high quality trees to be sent to the sawmill for lumber and low quality wood to be sent to the chip mill as pulpwood for paper. Historically, pulpwood had been cut into sizes small enough for a worker to physically move it to the trucks that took it to the pulp mill. As workman’s comp laws and equipment developments changed, pulpwood was moved in tree-length form, the same as wood for lumber. Price realized some of the pulpwood was of a high enough grade to be run through a small log sawmill. This inspired him to build a chip mill alongside the sawmill. “The intent was to buy pulpwood to merchandise the higher quality candidate logs for the sawmill. But we found that chipping is a good complimentary business to sawmilling,” said Carmical. “When the sawmill business slowed, the demand for round-wood chips would go up. We found they were counter cyclical.” This allowed The Price Companies to expand its expertise, becoming a well-rounded business capable of offering services in logging and pulp and paper. But that isn’t where the story ends. In the early 1980s, Price took two key steps that secured the company’s foundation for the future. It developed the Price Debarker, a rotating drum debarker that can process large amounts of trees at once and is easier on the wood than other mechanical debarking systems. The success of this invention spawned a separately-owned company known as Price Systems. Price also knew that, traditionally, the forest product industry was vertically integrated: the companies owned the land, ran the crews, processed the wood, and marketed the products to the end user. However, forest product companies had realized that logging was an owner-operator type of business, and about 25 years ago, Price realized chipping would be the next step to be outsourced. “We realized we could build these chip mills as an owner-operator and outsource the log processing for the paper industry. It took a couple years to sell the concept—convincing the billion-dollar pulp mills to put the lifeblood of their wood processing in the hands of a small contractor was tough,” said Carmical. But the pulp mills saw Price was capable of doing the job better than they could on their own, and at a lower cost. The result was a shift in Price’s focus from lumber and milling to equipment fabrication and contract wood chipping. The company expanded into 11 states with 21 chip mills, including a plant under construction in Macon, Ga. The company now services leaders in the pulp and paper industry like Georgia-Pacific and Smurfit-Stone, and it is building its first plant outside the US in Australia. “The pulp and paper market in Australia is growing, unlike here in the US. In the last 20 years, they started programs to encourage lands to go back to timber, and their eucalyptus trees make the best fiber in the world,” said Carmical, also noting Australia’s proximity to the growing Asian markets. Branching out Keeping its position as one of the strongest companies in the American timber industry requires even more innovation. Price is tied to a domestic industry Carmical said is in a fighting retreat—moving to areas of lower raw material and labor costs. So Price needed to come up with new uses for wood, and it seized on an opportunity in the energy industry. “Our business model has a finite opportunity for growth, and we are concerned with our national reliance on foreign oil. They are different sets of problems, but we realized that one answer could be the solution to both. That’s why we got interested in biofuels,” said Carmical. The company has since branched out in that direction, creating a new division called BIOstock Services. As the infant industry of waste management and renewable fuel companies grows, BIOstock is in position to provide the raw material these newer entities need, namely biomass to be used in developing clean technologies to produce energy. “It’s good for us business-wise, but it’s also good for our country’s future. The nation needs it, not only to replace foreign oil, but also to boost the health of rural economies,” said Carmical. Together with the leading industry associations, Price is hard at work building relationships to strengthen not only its place within the industry, but the industry itself. “Because of consolidation, there are less than half the players of 10 years ago. And with so much regulation, if the industry goes it alone as in the past, you get a fragmented message,” Carmical said. “Over time, we have developed close relationships because this is a word-of-mouth business. All we ask for is a chance to get in the game and get our name out there.”

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