Catalyst is still a major player in North Cowichan's economic and tax landscape, despite efforts to stop the municipality putting all its eggs in one basket.
Rob Belanger, Catalyst manager, spoke to council at its regular January meeting, giving some background and adding some new information to keep councillors - and the big gallery at the meeting - up to date on doings at the company's Crofton mill and elsewhere.
One timely subject Belanger addressed was Canada's plunging dollar.
"Foreign exchange? There's a lot of volatility in that. As a Canadian company selling in U.S. dollars, that has an advantage for us but not as great as some people think. Our customers are not dumb. They put a lot of pressure on us and we give up foreign exchange in pricing to a great degree. We also buy a lot of our raw materials in U.S. dollars," he said.
"And our debt is all in Canadian dollars so a debt of $28 million that started off at par is now $35 million."
He also talked about the demographic of Catalyst's workforce, calling it "another challenge and an opportunity we face."
Belanger explained that the average age of a mill worker in Crofton is around 50 as the baby boomer generation works its way through the mill.
"That creates a challenge because these are employees who have been around for 25-30 years and have a tremendous amount of knowledge and expertise so when we lose them we have to train people," he said.
"But this also provides opportunity for jobs. For a decade before 2012, we virtually did not hire as a company. In 2013 with attrition starting to occur with retirement, we hired 54 people just in Crofton. In 2014, last year - 75 people. And already this year - 10.
"There's a huge job opportunity over the next five years. A lot of the people we are getting are local people with young families. They are starting out their careers in very good paying jobs. So that's something we obviously want to sustain," he said.
However, Belanger also said the company was concerned that there might be moves afoot at North Cowichan to reverse a tax shift a few years back that gave the operation a break.
"We really want to thank North Cowichan council for that change which really supported the retention and growth of Class 4 business in the area."
He also said it was "a very important contribution" towards helping Catalyst when the company went into creditor protection in September 2012.
"I think it was also an important and shrewd business decision by council to reduce the dependence of the District of North Cowichan on a single taxpayer."
Belanger tried, briefly, to explain that the company is trying to manage its cash flow in the face of a lot of challenges while still maintaining enough to keep afloat.
"In 2013, our cash flow was minus-$22 million and so far for three quarters in 2014, it's minus-$5 million so we see improvement, which is good, but it's still negative."
They need $63 million of available earnings just to pay for interest on debt, the pension plan, and capitalization required to sustain the operation, he said.
"When the cash flow is negative, you're burning cash, you're going into your savings. We are burning cash as a company. That is not a good position," he said.
Crofton includes both a pulp and a paper mill. The other Catalyst mills in Port Alberni and Powell River are paper only.
"So paper's very important to us. Paper demand has declined significantly, particularly in newsprint. It's because of these," he said, holding up his phone. "It's the digital age. Our industry is under significant pressure from loss of demand. In the last nine months, newsprint pricing in North America has gone from $680 a tonne to $620 a tonne - a nine per cent reduction.
"We make 350,000 tonnes of newsprint so that nine per cent translates into $7 million in lost revenue just in the last nine months.
"Similarly in pulp, there's pricing volatility. In the last four years the price of pulp has ranged from $800 a tonne to $620 a tonne. Again on about 350,000 tones of pulp that's a 30 per cent change that's worth $60 million of revenue.
"We don't have $60 million to withstand that kind of change in our pricing."
Fibre availability is another problem.
"We're looking at a 20 per cent increase in fibre costs in the next five years. That means we're looking at $32 million for just Crofton."
Chips are short because whole logs are going to China and also because of beetle kill in the forests of B.C.'s Interior.
Having BC Hydro push up costs over the next five years by 30 per cent doesn't help, either, he said.
"We, as a company, are BC Hydro's largest customer. There's a lot of energy in making pulp and paper. That's a $50 million increase over the next five years," he said.
All of that means that Catalyst executives and planners are doing a complicated dance, and it's one that's made even tougher when opportunity unexpectedly comes knocking.
Catalyst has recently bought two mills in the United States.
The companies were joining forces and justice department officials told them to sell off two mills within 60 days or forego a $2.5 billion merger.
For one reason or another, the big American players backed away.
"It got to us. Our original view was that we were not interested but our board said, 'Go, kick the tires and check it out. Then we found that we could get $184 million in mills for $62 million. It was a once in a lifetime advantage. We took on extra debt but we believe we're getting assets that will work well for us in the future," he said.
During questions from councillors, Belanger explained to Coun. Al Siebring that the company's three operations in B.C. react in concert.
"Crofton did well last year. If pulp's doing well, the most profitable act that we have is Crofton because it has a pulp and a paper mill. Conversely when that pulp market drops, we lose a lot of money in Crofton. Fortunately for the company, our paper mills can now use a low cost raw material. It's a cycle.
"Some years I can say Crofton is No. 1. I like those years. And I can go back a few years ago and pulp was losing money and our paper business locally was supporting it. That's why I chose to present as a total company."
