Claymark: Receivership to triumph


Turning the business around

When New Zealand’s largest manufacturer and exporter of premium pine products - Claymark - was placed into receivership in 2019, one group saw this as a business opportunity.

Despite Claymark’s name being tainted by the receivership, a consortium led by Paul Pedersen bought it out, turned it around into a thriving business, and increased its sustainability accreditation.

“I’ve got 40 years’ experience in processing, saw milling and wood manufacturing in New Zealand, Australia and Fiji, so I felt comfortable navigating Claymark as a business,” Pedersen said.

Pedersen said the company still made money throughout the receivership, but needed to make some core changes. “The team was exceptional, but we evaluated every product line and cut out the products that weren’t making money,” Pedersen said.

“Some people were nervous due to the receivership, and it took us months to get things back on track and create stability with the employees, key customers and our creditors. We’d also just come out of Covid lockdowns, where we had to shut down numerous times. At that time banks struggled to see our value because they wanted to see three years of financials.”

Exporting offshore

Seeing as 65% of Claymark’s business is exported offshore, foreign exchange (FX) hedging is extremely important to protect currency fluctuations when the business pays bills and is being paid from overseas.

“Hedging foreign currency, means locking in FX rates today for settlement in the future, and therefore smoothing out future NZ Dollar revenue expectations,” Kiwibank’s Senior FX Dealer, Hamish Wilkinson, said. Wilkinson works with Claymark on its foreign exchange and interest rate risk management.

“In Claymark’s case, hedging allows the business to mitigate foreign exchange risk, given its forecastable orders from a diverse and high-quality customer base. As a trading nation, a number of New Zealand businesses face the volatility risks associated with selling products in foreign currencies, so Kiwibank’s Financial Markets team provide specialist products such as FX hedging services to these import and export businesses,” Wilkinson said.

“Kiwibank was our bank for FX and they traded foreign currency very well, so we migrated all our banking over to them after an 18-month relationship with them on the currency side,” Pedersen said.

“Even though Kiwibank is smaller than its big Australian competitors, they took on our big, complex company and stepped up to the plate. We’ve now taken on another sawmill, so we own four mills. We produce and process everything internally and that has increased our customer base. The key to a successful export business is to maintain high quality and keep as much in-house as possible, so you’re not having to rely on anyone else. ‘Ingrained precision is our motto’," he said.

Claymark’s receivership in 2019 was widely reported in the media and seemed to have a paralysing effect on most New Zealand banks that weren't willing to provide any banking services to the new owners.
Simon Whittington, Kiwibank Relationship Lead for Major Client Groups

Global sustainability

Prior to developing their sustainability strategy, Claymark had a number of internal sustainability initiatives in progress but no formal sustainability approach in place. We saw the good Claymark was doing and wanted to support them with developing a strategy which ultimately enables them to manage their risks, strengthen their stakeholder relationships and build long-term resilience.

We provided Claymark with high-level guidance on things we’d like them to think about in their sustainability strategy and together, Claymark and Kiwibank selected Oxygen Consulting to develop their strategy. From there, a materiality assessment to identify what social and environmental issues are important for their business was undertaken and this formed the basis for their sustainability strategy framework. This includes an action plan, tactics and targets to support the goals in the strategy.

Some of the actions Claymark is already taking is that they're FSC (Forest Stewardship Council) registered and align themselves to the sustainability guidelines of their offshore customers such as Home Depot and Lowes in the US.

When it comes to their in-house processes, Claymark use all their wood waste to fuel their heat plants, which in turn kiln dry their timber. All their heat plants are fuelled with their own bi-product. When it comes to packaging, they strap all products with PET (polyester) - plastic straps that are 100% recyclable. Previously they were strapped with steel, which is much more carbon-dense. Those kinds of developments have been driven by the customers who are the ones that must dispose of that strap. Claymark has therefore driven their suppliers to create recycled plastic products.

Future growth

Kiwibank’s Relationship Lead for Major Client Groups, Simon Whittington, was confident to expand the bank’s relationship with Claymark despite the wide media coverage of the company’s previous receivership.

“Claymark’s receivership in 2019 was widely reported in the media and seemed to have a paralysing effect on most NZ banks that weren't willing to take on the opportunity to provide any banking services to the new owners. Our initial due diligence quickly established the strong credentials and industry experience of Paul Pedersen and his co-investors. This in turn gave us confidence to start a business relationship, initially based on FX hedging only, but with a view to expand the relationship to full banking services once they had a 12–18-month track record with Kiwibank. We are delighted to have Claymark onboard as a main bank customer and look forward to supporting their ongoing growth in the years ahead,” Whittington said.

Claymark is still New Zealand’s largest manufacturer and exporter of premium pine products and continues to grow worldwide.

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