Ep 112 - The Evolving Supply Chain to Enable Sustainable Construction

Adam Jones (00:03):

Well, thank you so much for coming on the podcast. Ian, can you start by telling us a little bit about yourself and Timber Link and some of the most recent investments that you've been making in this space?

Ian Tyson (00:15):

Yeah, sure. Well, I've been a timber link for 10 years as the chief executive and I've come from a background of timber and building material companies and other companies within the general construction sector, and that's been a lifetime of 45 years of working in various aspects of it, whether it's in the retail merchant side for people might 10 and Bunnings or in the supply side with people like cut holes and borrow and CSR and other groups. So building materials, construction's been a passion of mine. And of course being a timber link for 10 years as we've been changing and growing the business has been an absolute joy and a great opportunity to take a group of assets into a modern 21st century shape. So really enjoyed that as an experience.

Adam Jones (01:09):

Yeah. So can you tell us a little bit about what sort of investments you've made recently and alongside that, why did you make those investments? Because I'm sure the existing business was quite profitable and the resi market's doing so well. What's so exciting about moving into new spaces?

Ian Tyson (01:26):

Well, I suppose if you look at it from a strategic point of view, we're in a highly cyclical market and if you hung around long enough, I have, you've seen the ups and downs and the good and the bad and the ugly of it all. And it's always said to me that a timber manufacturer has to have a diversity of marketing customer type, but how to deliver that is the challenge. What does that look like? And really the mass timber market has provided the opportunity to answer that question and to answer it in a fundamental way where you're offering not only value for the customer and the market, but you're also optimizing the value of timber and using its incredible properties to the advantage of the whole of society. So it's a real coming together of all of those things. And being an integrated company back into the forest, we're always looking at how we can optimize the value of the tree and how we can provide the shareholder and also the broader marketplace, the most advantageous offer that we can, which transcends building cycles and puts us into different markets with different opportunities attached to it.

Adam Jones (02:44):

Yeah, awesome. You mentioned one thing there, so diversity of products and the value of the log. Can you expand a little bit on why diversifying products increases the value of the actual log itself and how this might actually to sustainability?

Ian Tyson (03:01):

Yeah. Well firstly, if we take the sustainability aspect as a company, that's been a platform for us from the beginning. And if you look at our ownership structure, which is assets managed by new forests who built a business on a sustainability environment platform and now the second largest player globally in the forestry sector of asset management, it's clearly been a successful strategy. And so as our asset manager, they've instilled in us those values and those understandings of how we need to be a sustainable renewable style of business. So it's become a normal part of who we are and what we're about it. It's then about how we execute that in our own way. And we've done that through making commitments to things like SBTI targets commitment to the Paris Accord, to using the compact global compact model, which is the five stage model signing into that.

(04:03):

So we've made real commitments for us to be a sustainable company using a renewable sustainable material, which is all certified of both FSC and PC. So it's a very natural step for us to find ways then to take that renewable sustainable resource and then say from the forest itself through to the customer as custodians of that, of what nature provides to it, it's beholden on us to find the greatest value that we can contribute for what society has been blessed with by having trees as a normal natural resource. So we find a feel a real sense of obligation to that. And then of course it makes good commercial sense. So you've got the two things working together, the social platform which we've committed into, as well as the fact that commercially to have a more diverse different style of business across a range of products and customers and market segments is a healthy business dynamic for us to be involved in.

Adam Jones (05:09):

Yeah, it makes a lot of sense. Tell us a little bit about the process of expanding into new markets. I'm sure you don't just wake up one day and it's like you gone to local shop and buying some milk. I'm sure there's a lot that goes into it. So can you enlighten us on that one please?

Ian Tyson (05:23):

Yeah, it certainly is. We started serious investigation of this market more than six years ago, and a lot of people, you attend a lot of global conferences, you talk to a lot of influencers in the market and you start to form a view of what's the space you may be able to play in and what does that look like? And even prior to that, in my days back in Cardwell Harvey where we were in engineered products and I had some exposure to it, we looked quite seriously at this mass timber market and said What role for us? And at that stage we just felt it was a bit early. So this has been a long-term kind of build of knowledge, some background with people that have been exposed to some of the elements already and then saying, what's the position for us as a business?

 

 

(06:17):

Is there a role for us knowing that we want to optimize our value and we want to be good custodians of the material we've got? How does that play out in style of company that we are? And so a lot of detail planning. We've got a substantial team on already and we haven't sold any product at all. So this is the long term strategic investment that you make and the commitment that you make and building your market understanding and so that when you do start to supply, you've anticipated the market's needs, you've tried to build the right style of assets and capability that's going to meet what markets want into the future. And it fits into the kind of business that we are. And that's been a long journey, big investment time, money and effort with talented people. And it's got us to a point, we're very excited this year as when we'll actually launch into the market.

Adam Jones (07:13):

And I'm sure everyone is super excited for that. And it's such a big deal. How do you see the supply chain growing alongside demand? Cause in one hand, we're only a fraction of what the market share of concrete is inside of Midrise construction right now. I'd imagine the bottlenecks might be different as we go to 1% and then 10% and then if say, blue sky, we were to be 80% of say what buildings are, if that's possible. So how, my first question is if a demand does increase by such an exponential amount, how will the timber supply chain sort of meet this increasing demand going forward? Yeah,

Ian Tyson (07:58):

Well I think firstly, timber isn't the solution for everything and we've got to be realistic about that. There are structures and there are styles of building, and there are different engineering solutions where timber can play a part or play a hybrid part or play a loan part or perhaps play very little part. And so thinking that we're going to be 80% of the construction market in timber is just wishful thinking and not realistic. So Tim, so timber needs to find its value position and the market will tell us that the market will see where we offer the most amount of value, where the properties shine through, where the decisions in terms of ease of build and speed and renewability and sustainability and all the other beautiful factors that are around timber as a wonderful material where they shine through and people value those. And we haven't found globally what that position is yet.

(08:59):

The global markets in transition, understanding it with forces that are bigger than the industry itself that are playing out society based forces. And we look at plenty of reports and there's plenty of people paid lots of money to have a crack at it, but 15% compound growth is the number that's thrown around pretty regularly. But I think when we look at Australia, it's a completely different story. At the beginning of our journey, we're at just getting through early adoption. The benefit of having another major player in the market producing product will we'll have more conversations, we'll have more capacity, we'll have more capability not to service everything, not to supply everything, but to find a part of the market where we grow. And we encourage the use of timber in construction and that will grow the market and a very different way from just normal market forces.

(09:55):

And as an integrated manufacturer back to the forest, cause we're always looking at ways that we can optimize our fiber. We've invested more than 200 million dollars in our underlying assets in terms of capacity and capability and improvement. We've got a 63 million upgrade happening at the moment of our plant, which will increase our output by more than 50%. So we're in a really good place to say where the fiber goes, not to take it away from our current core markets, but to find new markets with new properties and new benefits that we can grow with. And we're the kind of company that's got a capability to continue that growth if the market is supportive of that with a fiber source that enables us to do things that perhaps some others might struggle a little bit more with than we might.

Adam Jones (10:46):

Yeah. Oh great. And let me know if I'm rehashing the same ground here and if you'd prefer to move on. So if the demand does continue to increase and then we've got the capacity within the factories that you're investing in right now, and I assume we can potentially build more factories in the future, do you see in at some stage that being constraint on the land at whatsoever and we need to plant more trees or what are your thoughts on going back to that and then the rotation time? Yeah, if it's going to get that as the constraining bottleneck.

Ian Tyson (11:20):

Yeah. Well I think of the next 30 years, the answer lies in what are the best choices where the fiber goes, we're not going to suddenly have a lot more trees arable, although if you look at some of the plantation ages in certain regions, there will be a bit more fiber coming through. And some of that, fortunately is some of the regions that we're in. But I think the opportunity for CLT particularly is that it's a finger jointed product. We generate a lot of mid-range and a lot of shorter material. Our normal construction markets are usually after either studs or longer lengths. It's a very complimentary product as we use smaller logs and we use technology to optimize the structural capability of those smaller logs, which we are now doing. It does throw out more product that's available to go into different applications, which structurally is perfectly suitable for the application.

(12:21):

But in its core markets that we're supplying at the moment is the less desirable material. So this is a complimentary strategy, not a competing strategy. And that will play out over time. And as we continue to bring more volume onto our business in the next five years, we'll have a ready source of available fiber if that's the right place for it to go. And we'll make sure our core customers still receive what they need to and we'll play our part in that market as well as developing these other sectors of our business of which some of our existing customers will play in those sectors as well. And we'll be supplied to them in glue Lamb and some will venture into CLT as what we want to do is open the market up and make it more available to more people for more conversations, for more buildings to expand it and for more people to live in sustainable renewable structures. And that's got to be a good thing for everybody.

Adam Jones (13:19):

Yeah, a hundred percent Kids ask a little bit about how you think about ethical sourcing of timber and what are some of the things that designers need to be looking out for and what extent should they be learning themselves and take responsibility within themselves to design this way?

Ian Tyson (13:38):

Well, I think we all have a responsibility to ensure that the materials we use are ethically sourced. I think that's very important and that there is a sustainability trial that's independent and can be verified that gives everybody the confidence to build with material so that it is delivering the benefits that we want it to deliver. And that's why we're dual certified in our forests and why we go to such great plantation source material to ensure that it's meeting all those requirements. But I think it's just got to be on the radar of all parties, whether it's important material coming in, whatever form, whether it's stick form or penalized form or beam form, that there is that traceability that people can build with confidence. And there are plenty of great manufacturers around the world who are doing a fantastic job in that and can support their product the way it should be. And I think over time we're seeing those less reliable players being marginalized and perhaps being marginalized into markets that are less strict or less concerned than what Australia is. And I think we've, Australia's got a pretty good track record of ensuring that we're doing the right thing by our product and continue to do so.

Adam Jones (15:00):

Yeah. Fantastic. So how do you see everything evolving in the next five years? I mean, we've spoken about supply chain, you can take the question from that point of view or just more open-ended, the whole industry in the next 5 to 10 years.

Ian Tyson (15:15):

Look, I think as Alex Riker said, this is the year of timber. We're in such an exciting period for us as an industry and as an old bloke in the industry and hanging around from sticking timber in racks at 17 and in McEwens to seeing where it's got to now, I just can't believe that generational change of the way timber is perceived, the way the value is, and we're just on the cusp. This is all in front of us. So it's an incredibly exciting journey and it's going to provide amazing careers for people, amazing job opportunities. It'll provide opportunities for companies to look different, to be different, to be sustainable, to have different qualities, different characteristics of it, and for the end market and the end customer to get the benefit of all that and the way they live, work, and play. I think it's just such an exciting time and I'm just delighted that we can play a small part of that as a company to bring an offer to market that just helps that journey a little. And then we'll be committed as a business to stay on that course and do whatever we need to support it and to continue it to grow.

Adam Jones (16:30):

So you mentioned there, you started at 17 with a certain job and then you've obviously reached to be one of the leaders within the timber industry as the CEO of Timberlake. What advice would you give people who are just starting out today and trying to improve their career and have something exciting evolving here?

Ian Tyson (16:49):

Yeah. Well, I think what was trying in me as a casual and then the university trainee and going through it is take time to learn the industry, take time to understand what it's about, get to feel the product, get to understand the product, get to understand the market. Nothing happens unless something's sold. And why does it sell a, why doesn't it sell? So invest yourself into it. Jump in learn. I did a stein course right at the beginning of my career to sort of understand what is this about, what makes it unique and different? And so my advice is don't be halfhearted if you're going to be in the industry, jump in, get involved, get engaged, tremendous people, a lot of knowledge, learn it from the grassroots up, really feel it. And then you'll start to optimize your position and your value equation that you've got for you. And you'll be part of an industry that's dynamic moving forward and offers so much advantage to people in a modern 21st century environment compared to a lot of other materials that are out there. And a lot of other products that are in the market and careers are there to be built without any question.

Adam Jones (18:05):

That's awesome. Well, such a great note to end on, Ian, if people want to find out more about yourself and Timber Link and the investment and everything that's going on. Actually I'll break that question in two. So when everyone's so excited about the new Mass Timber product range, is there any updates on when we can expect the first projects to be going ahead?

Ian Tyson (18:26):

Yes, yes. We're still, we're running to time, which is no main feat when you've started a project during Covid. It's a deal I can tell you's. Yeah. And building a CLT g LT plant, which is the first of its time in Australia, is a complex exercise, but we will be in market. We're selling product and delivering product in October, and we're out there now, I mean we're in Sydney build at the moment and showing our wears. And we were there last year where we exhibited exhibited. So we've got an active team, we've got the support material, we've got the testing that's been provided now we've got things like fire tests and structural property tests. And so we're full steam ahead and I'll be standing there at the mill waving the first truckload of CLT panels that go out with a big smile on my face as we think this is a dream achieve for a lot of people in the business.

 

Adam Jones (19:21):

Yeah, that's crazy. What, five, six years ago it started off with a dream and then that first truck going off will be an awesome milestone, no doubt.

Ian Tyson (19:30):

Yeah, it will be. And as I said, my journey with the product probably goes back 12 or 13 years, so it's a long gestation and sometimes you just have to be patient and you have to find the time. That's right. And this is the time that's right. And it's the right company to make the investment with the right framework around it to be able to make it happen. And that's an exciting set of things coming together.

Adam Jones (19:57):

People want to find out more about what we've been speaking about now or if they've got any projects or anything like that. Where should we be pointing the audience?

Ian Tyson (20:05):

Yes. Well, they should definitely be coming into our website and we've got plenty of information on Next Timber that's sitting on there. We've got some wonderful literature, which I just happened to have in front of me, which explains a lot about Next Timber and nexttimber.com.au is our website, or you can access it through Googling Timber Link or just Googling Next Timber. There's a lot of stuff on there. We're keeping everybody up to date about what we're doing, and I hope our market gets just as excited as we are to be out there and servicing the needs of our customers and making a difference hopefully for building in Australia.

Adam Jones (20:46):

Okay. Thanks so much, Ian. I'll leave it there. That was awesome. Good.

Ian Tyson (20:50):

Thanks Adam.