Finding financing can be the biggest challenge for a small business. Such was the struggle faced by the plywood mill in Cochrane, Ontario, two years ago. While there was demand for the plywood and pine products the mill was producing, the company could not get financing to manage their supply. As a result, the mill was closed at the end of 2013, leaving about 240 people unemployed.
For a town of just over 5,000, the loss was devastating. But it wasn’t long before someone saw the potential in this small town’s trained workers and the mill itself.
Enter Rockshield Engineered Wood Products
“It really all started because we were looking for machinery,” says Derek Cathcart, Chief Financial Officer, Rockshield. “We were looking to invest in some machinery to open a mill in another location when we were presented with this ideal opportunity.”
The core Rockshield investors have a long history of success in small business investment in the wood products business. They purchased the closed plywood mill knowing they would have to spend some money to update machinery and do some general maintenance. The cost of upgrading was nothing compared to building in a new location. There was also the bonus of having trained workers in the area already.
“To build a plant like this would cost over $60 million dollars,” said Cathcart. “The changes that we plan to make to this facility over the next few years will create what is, effectively, a nearly new plant at a fraction of the cost.”
The Rockshield team plans on investing in more automated machinery with a focus on operations efficiency. “We see a lot of opportunity in the current production line where energy can be recovered and redirected to provide more heat sources in the plant, there are also a number of operational upgrade opportunities” said Cathcart.
‘The timing couldn’t be better’
When the economic crisis hit in 2008 the number of new housing builds in the U.S. dropped from over 1 million to under 400 thousand. This resulted in an extreme drop in demand for wood product imports to the U.S. Now the rate of new home builds has risen back to almost pre-recession levels, reinvigorating the demand for quality wood products.
Cathcart expects that this new demand, combined with the low number of remaining hardwood plywood mills in North America, will help fuel the success of the Rockshield mill.
“There are a number of economic factors working in our favour right now. The demand for new home builds in the U.S. is rising, the lower Canadian dollar adds a lower cost to U.S. customers and the low cost of energy helps to save on shipping,” said Cathcart. “The timing really couldn’t be better.”
Managing the Risks
With all the elements in place to succeed in their new business venture, Rockshield was looking for added security to support their new venture. They looked to Export Development Canada (EDC) for to guarantee a loan in order to manage their risks while the mill gets all its finishing touches.
“Even when you have all the right pieces for a successful business in place, it’s good to have that extra security,” says Guy Racine, Senior Account Manager, EDC. “Having a guarantee on your inventory helps banks become more comfortable with financing. That’s necessary sometimes to get a business off the ground.”
The mill, which is scheduled to open in early May 2015, will initially employ one shift of 75 people, but once it reaches capacity, that number could exceed 200.