It’s just business: L’Estrange Gunns CEO has eyes on mill prize

The Examiner, 13 August 2011

GUNNS CEO Greg L’Estrange talks about his time before taking on the top job at Gunns and what the future holds.

JAWS dropped. Here was the boss of the country’s toughest timber company using a national industry forum to declare the forest wars were over and that greenies were the winners.

“Hate,” Greg L’Estrange recalls of his colleagues’ reaction.

“Anger. ‘You’re abandoning us’ – all of those issues. But you can only get there and say these are the facts, try and deal with them.”

Nearly a year later, Mr L’Estrange does not think the industry has moved on.

“You look at all the rhetoric that’s going on around the forests debate now. They haven’t moved beyond the anger stage. Where this is purely business,” he says.

So it seems with the managing director of Gunns, at lunch even. No hatted restaurant; no private butler.

We have cafe sandwiches with paper napkins at a coffee table in a sparse office in Launceston. Great.

“What did Gordon Gekko say? ‘Lunch is for wimps’?” If there wasn’t a twinkle in Mr L’Estrange’s eye as he says it, this meal would begin to pall.

I pick up the pressed turkey, cranberry and lettuce on mixed grain. The Cassandra of the timber industry nibbles at ham salad on white, and sips a cuppa.

We revisit the Forest Industry Development Conference last September where he said: “We have lost the public debate and the support of the broader community … the industry has been out-thought and outplayed.” Gunns was exiting native forest logging.

In Tasmania, the awful truth is that in the past three years, half the island’s forest workers have lost their jobs.

Australian National University research shows losses are accelerating and many blame Gunns for deserting them.

Mr L’Estrange has some explaining to do. Can Gunns, the one-time 800-pound gorilla, survive its current financial pounding?

How convincing can Mr L’Estrange be about a pulp mill that still doesn’t have its $2.3billion in financing, after nearly seven years?

And why should the industry trust someone who just sold a strategic asset to those same greenies?

Why on earth did Mr L’Estrange come to Gunns at a time when it was cast as Tasmania’s “evil empire”?

“Ah, yes. I ask myself that too many times,” he said.

Turns out it’s partly in the CV, and partly in the blood.

L’Estranges have been laid to rest among the red soil graves of Condobolin cemetery in central-western New South Wales since 1881.

Greg L’Estrange grew up on a modest sheep and wheat farm and went to the local school. His parents, Ken and Novelle, taught him two things, he says.

“You have to be fair. And your word is your bond. So when you do a deal, you do a deal. And you honour it.”

But being the third son on a farm, he had to find somewhere else to deal. He joined the Rural Bank of NSW, moved to Sydney at 22, and soon took a job with a venerable timber merchant, Allen Taylor & Co.

After Taylors was acquired by Boral, Mr L’Estrange went north to run its Queensland operations and found himself in his first environmental stoush: over logging on Fraser Island.

By the late 1980s, the chainsaws on Fraser were into brushbox and satinay – gorgeous rainforest timbers from big trees.

“It was a very bitter battle, eventually resolved during the Wayne Goss (Labor) government, that logging would cease and people would relinquish their concessions.”

He takes two lessons out of that fight.

“I think it was formative that in a conflict, seeking resolution is required.” And second, usefully, that government compensation can be a big help with a transition out of native forest and into plantations.

Fast forward 15 years and he was at the top of CSR Timber when it decided to exit the industry.

Mr L’Estrange completed that task as Gunns was moving into pine and he came to Tasmania to run its timber products group.

At the time, flush with woodchip cash, Gunns was in everything in Tasmania: wine, farms and even a colonial-era historic house.

Mr L’Estrange fishes around for another sandwich. Chicken and sun-dried tomato. I try the brie and something.

It’s history now that during the global financial crisis, Gunns began to hit hurdles, and Mr L’Estrange quickly became chief executive.

Community anger with the company was hot, and woodchip sales cash started to dry up. Gunns began to sell some of the tinsel, but that wasn’t enough for the major shareholders.

Chairman John Gay and board heavyweight Robin Gray were ousted in May last year. Mr L’Estrange was suddenly it.

The remaining board stuck to the possibilities of a pulp mill, though their CEO was less than optimistic.

“At that stage, in my view, the mill had zero chance of getting off the ground,” he says.
So he began to reframe the debate. To him, the crunch had come years earlier.

“The main market for woodchips, Japan, signalled early in the last decade that it was moving out of native- based products and going towards plantations. Made a clear statement.”

Sawn hardwood prospects were no better. “I keep pointing this out: 30 years ago consumption of hardwood in Australia was 3 million cubic metres a year. Last year, less than 1 million.

“Preferences have fundamentally changed. If you look, all the best tree-growing areas in our natural forests are the most appealing for those who don’t want them harvested.”

For him, belling the cat at the September 9 speech was a straightforward move.

“I think that people had been living in denial. They had missed all of these trends.”
It must have helped that Mr L’Estrange was not steeped in Gunns’ history or stifled by the small Tasmanian business community.

As a mainlander on a $1million salary plus bonuses, without even the commitment of share options, was it not easier for him to speak freely?

“I’m just telling it as it is,” he says. “With a degree of honesty. And I think the conversation needed to be had, even if people didn’t want to listen. That’s just the way I am. Probably blunter than I should have been.”

Under him, bushland parcels, hardware, the wine business, walnuts, the historic house and some plantations have gone. Sawmills closed. Even the office we sit in is for sale.

Still, in the face of a soaring dollar and a continuing debt load, Gunns has become a bucket to kick in the sharemarket, a trading halt called at a perilous 20.5 cents.

Where does it end? There’s little appetite for another sandwich as we get to the nub.

“It ends with moving into construction of the pulp mill,” Mr L’Estrange says. Gunns has already sunk $219million into developing the mill and still owns or controls enormous plantations to feed it.

Though “ready” since 2009, the mill still has no financial green light. It must be hard to sustain self-belief in this giant vision.

Mr L’Estrange pauses. “When you work through the project, it is compelling … Australian manufacturing generally doesn’t believe it can be competitive. And in some places we can’t.

“But where we can, we have to try a whole lot harder than we have been. I think this company, and more specifically this project, allows us to do that.”

Meanwhile, he has tried to build a “social licence” for the pulp mill – a loose concept perhaps best defined in this case as too few community opponents to hurt the financing.
He also has to deal with the residual anger of the timber industry; of contractors who found themselves in debt up to their necks when Gunns made the shift out of native forest; and of sawmillers who lost jobs.

This boiled over in one of the more bizarre chapters of the long Tasmanian forest conflict when Mr L’Estrange sold Gunns’ strategic Triabunna woodchip mill to wealthy environmentalists Graeme Wood, of Wotif.com, and Kathmandu founder Jan Cameron.

Even more ironic was the man they chose to run Triabunna – Alec Marr.

The long-time Wilderness Society boss was number one defendant in the Gunns 20 case, a marathon attempt to prosecute green opponents through civil courts launched in 2004. This largely failed, at costs to the company of about $4million.

It’s a measure of changed times that, despite dealing intensively with each other during the Triabunna sale, Mr L’Estrange says he was unaware of Mr Marr’s “number one” position in the suit, and Mr Marr didn’t mention it.

The $10million Triabunna sale drew howls from local timber industry and state government interests who lost the contest.

Mr L’Estrange is unfazed.

He believes the deal allows for the chipper to continue, and Gunns served the industry as well as it could.

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6 Responses to It’s just business: L’Estrange Gunns CEO has eyes on mill prize

  1. Jo McRae says:

    How can L’Estrange, an intelligent person, imagine this mill would be financially viable? Importing plantation timber from interstate then exporting pulp, with Australia’s wages, would have to make it the most expensive pulp in the world.

  2. Why can’t you pay your bills Greg? You owe ForestrySA and ForestryTAS million$ and yet you dream of borrowing billion$. Were you a spoilt child that threw tantrums in the supermarket?

  3. gunnsblog says:

    Gunns made a choice 12 months ago to exit the native forest sector. Such an exit in Tasmania could have been achieved through a “clean” sale or to try for lasting peace for Tasmania through the Forest Principles negotiations. We chose the latter, rather than cutting and running. That choice has put us under a huge amount of pressure, and has been detrimental to our brand and financial position. What has happened is that the burden of that agreement has been shifted onto Gunns, rather than being recognised as a need for Tasmania. I do believe though that our decision to stick with it and go for peace will be vindicated as the right outcome for the whole community. Greg L’Estrange, Managing Director

  4. Greg, its nice to see Gunns wants a ‘lasting peace’ in Tasmania but if you care about Tasmania why dump 64,000 tonnes of contaminated effluent into our peak fishery every day?
    I would rather have people up trees than an even higher cancer rate than we have now.
    Why export pulp to Asia just to buy it back as paper? That makes no economic sense at all.

  5. Brett Lucas says:

    Dear Mr Bridges,

    Do you or your learned colleagues have anything constructive to add?

    Remind me again of the number of jobs created by Bob and Christine in the past 40 years?
    (Sitting in a tree or voluntary protesting, commonly known as trespassing, does not count)

    I believe you need a new turntable, that old record is well and truly stuck.

    While Mr L’Estrange was exercising his democratic right as a young man in the supermarket, you possibly heard him from the Lentil section?

  6. Lawson Harding says:

    Dear Burnt Bridges,

    Not only does Gunns want lasting peace between Tasmania’s foresters and environment groups, it wants to build a pulp mill that will NOT dump contaminated effluent into the fisheries off the north coast, or off Tasmania’s actual peak fisheries off St Helens, Triabunna, Strahan and Hobart etc. Gunns and Tasmania will have that, and the EPA and Commonwealth Government’s independent experts will be able to tell you exactly how well Gunns is living up to that promise.

    The Bell Bay pulp mill will be nothing like any other mill Tasmanians have seen. The ECF Light process for refining pulp combined with leading edge biological waste treatment means that the broad range of marine life will not be affected by the release of biologially treated waste water. The bio-treatment and release methodology has the approval of both State and Commonwealth regulators, and you can read the relevant section (2.3 and 3.2) of the Final Report on Commonwealth Requirements and see for yourself. http://www.gunnspulpmill.com.au/permits/epbc/Hydrodynamic/GNS-SRPT-0578-B%20(final)%2020110131.pdf

    So, on this basis, Gunns asserts that both the pulp and fishing industries can readily co-exist (As it has for example in Victorian Bass Strait waters for many years). False claims of environmental damage are likely to cause more damage to wild fisheries, aquaculture and agriculture businesses in the Tamar Valley than anything that the pulp mill could produce.

    Regarding the “even higher cancer rate”, Gunns is happy to respond to facts as far as possible, should they be forthcoming.

    Finally, with regard to the economics, exporting pulp to Asia and buying it back as paper is the underlying economic driver for this project and probably the pulp mill’s greatest strength. It will mean Tasmania will greatly reduce its export of wood chips to Asia and buy a portion of them back as paper products. This will double the value of exports from Tasmania. This has to be better for Tasmania.

    Transporting wood chips is extremely inefficient under today’s best practice pulp and paper business models and is a major cause of the collapse of the industry we are now experiencing. This was predicted by Gunns and is the main reason we have pursued the pulp mill project. The optimum is now to pulp wood near the forest, preferably near a port and transport the relatively compact pulp (25% of the mass of a wood chip) to the big paper factories near the major markets for final processing. The major markets in our case are in Asia. Perhaps one day, after the pulp mill is well settled in, additional downstream processing to paper could occur here in Australia and bring more investment and jobs to the land which does such a great job of growing the trees.

    Lawson Harding
    Environmental Specialist
    Bell Bay Pulp Mill Project

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