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Wood is an unique raw material that is environmentally friendly and can be harvested and replanted to perpetuity in managed forest areas. The product is largely classified on the basis of the growing regions (tropical and temperate) and attributes (hardwoods and softwoods).
It is traded in a variety of forms including, round logs, sawn lumber, plywood, veneers and fiberboards. The world trade of round logs and sawn timber is in excess of 135 million cubic meters and is valued at over US$ 23 billion.
Olam's Wood Products Business
Olam's entry into the timber business was in the teak trade flow from Ghana to India in 1994 and has since posted an impressive growth rate over the past 14 years. In this period, we have grown to being one of the largest suppliers of plantation teak round logs , both certified and non certified, in the world. This strong growth is the result of our strength in the three key dimensions of the business – sourcing strengths, spread and depth of product species and marketing presence.
We trade primarily in tropical round logs and tropical sawn lumber. World trade in this category is about 18 million cubic meters with a value of about US$ 4 billion. The rationale for choice of this segment is the opportunity it offers us to leverage our core strengths in origin management and our physical presence in producing countries. The ability to transfer understanding and experience of the timber business across origins, species and markets through intensive training and good management processes has been key to the rapid growth we achieved. The major producing countries for us in this segment are Gabon, Zaire, Congo, Ivory Coast, Ghana and Brazil while smaller producers are Tanzania, Nigeria and Mozambique for processed and finished products.
We place a significant emphasis on quality control and this is reflected in our quality management systems and procedures. Log selection is undertaken on the basis of physical inspection by graders at the site and after all the species are graded, the quality determined and their measurements taken, the logs are then individually marked. The logistics team up-country, which procures logs from the loggers, oversees the handling and movement of the logs to the log park where the quality, the number of pieces and the measurement is rechecked. Our robust risk control systems have given us a strong platform to grow the business without compromising on risk management.
We are involved in the entire value chain from contract logging of teak plantations, through to logistics handling, processing, shipping and redistribution. We are involved in sawn timber business in Ghana we have plans to invest in the downstream processing operations in Congo and Gabon.
In marketing , we offer a basket of origins and species to all our customers in key destination markets like India, Continental Europe and the Far East. We have our own marketing offices in these countries to provide personalized service to customers. These offices help in collecting information on species preferences and capture latest trends enabling us to cater to the changing demands of our customers. We also leverage our strong origin presence and product knowledge to suggest alternate species thereby offering better value to customers.
Our expansion plans include entry into more tropical origins, deepen our product range to customers and focus on developing new markets in North America and Middle East. Our objective is to enhance value through providing superior service to our customers whilst contributing to the economies and people who benefit from managed forest cultivation.
In 2006 we made a promising entry into the flooring business. We currently sell flooring components on a consignment basis to some of the largest names in flooring business in Western Europe. We are building up a configuration of sourcing and processing facilities for flooring components in China and Indonesia, in Asia and in Europe. We expect this business to become a large value generator in the years to come.
In 2007 we have been certified by SGS for FSC – COC certification and we would be looking at enhancing our presence in the certified timber business in the coming years.
Olam considers preservation of forests as a part of its social responsibility that goes hand-in-hand with long term business objectives. Olam's objective is to deal in wood products that come from sustainable and well managed forests.
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