Moving from the spotlight of the oil and gas stage to forestry front and centre is easy for a man who plays to mixed audiences with an electric guitar.
After 17 years of senior roles with powerhouse BP (NYSE:BP) and a decade on the energy file with Natural Resources Canada (NRCan), Brian Frank was appointed in May as president and CEO of now privately held TimberWest Forest Corp., Western Canada's largest private timber and land management company.
"You don't have to explore for your forests; you know where they are. And if you decide not to produce for economic reasons, your inventory continues to grow," acknowledged Frank of one nice change from his oil and gas days. "However, forestry is a much more challenged industry. For one, the costs are high in B.C. – the costs are high in the energy sector as well, but it's more than compensated in the market price that you receive for your product. In forestry, there's much more of a need to focus on efficiencies and costs. You simply don't have the same margin to play with."
Frank, a guitar enthusiast who still rocks out at corporate and charitable gigs in a Calgary band called Borderline, now plays the lead in a company with its balance sheet and corporate structure finally cleaned up after its acquisition by pension-fund heavyweights BC Investment Management Corp. (BCIMC) and the Public Sector Pension Investment Board. Prior to its acquisition, the Vancouver Island logger was set up as a publicly traded income trust with its liquidity and future growth potential pulled down by debt payments and cash-delivery commitments.
A harbinger of the future to come occurred in the U.S. housing meltdown of 2008, when BCIMC came aboard cash-strapped TimberWest through a $100 million convertible debenture offering, essentially giving the pension an almost 25% equity stake.
In its 2010 annual report, the company reported gross earnings of $21.2 million on sales of $268.1 million. However, cash commitments, interest and other financial wet blankets reduced gross earnings to a net loss of $60.2 million. Interest expenses alone for the year were $47.6 million and long-term debt was $354.6 million.
In June 2011, the two pension funds closed the $1.03 billion transaction, including the assumption of outstanding debt.
Frank said the acquisition and long-term outlook of its bedrock-stable new owners have the coastal company finally unchained for growth.
"The company had an obligation to distribute cash quarterly to its unit holders. There was a lot of focus on consolidation and costs. Because of that, TimberWest was constantly on its back foot," said Frank. "Now we have new owners and a private company and a mandate for growth. We can now shift from our back foot to our front foot and start thinking about the future. We can play offence now."
TimberWest's core business is selling of hemlock and Douglas fir logs to B.C and Pacific Rim markets, with an eye to any signs of awakening in the comatose U.S. house-building market. Much like its Island neighbour Western Forest Products (TSX:WEF), the company's timber supply has been safeguarded from the mountain pine beetle infestation.
Last year, in its final publicly filed quarterly, Asian exports accounted for 70% of TimberWest's log sales and revenue. Domestic sales account for 27% and the U.S. only 3%. Sales among its primary export markets of China, Japan and Korea increased up to three-fold over the last few years.
Frank said there's some "foundation work" that needs to be done to further expand TimberWest's international profile.
"New ownership has transformed our potential from being local to being truly international. It's up to me to show the board we have the organizational capability, strategic framework and vision to be successful."
TimberWest chairman David Emerson said Frank has the perfect mix of pubic sector, private sector and international savvy to expand and integrate the company's footprint into the global economy. Emerson, who's made his mark both as federal cabinet minister and corporate executive across multiple industries, sees Frank as a kindred spirit.
"He's a little bit like myself," said Emerson. "He's moved comfortably between public and private. He's got a really good sense as to what being part of a global economic network entails in terms of logistics, supply chains and linkages between businesses among many competing countries."
Frank said his career path has followed no master plan. However, he's clearly driven and success oriented. As a youth, he wore a groove out of Neil Young's Decade hits album, replaying the disc endlessly to learn the guitar. Now, he effortlessly plays licks by Jimmy Page, Pete Townsend and new guitar hero Jack White. Self-admittedly competitive, he's also recently taken to weekly Grouse Grinds, where he counts "how many people I pass versus how many pass me."
"I've never aspired to be a CEO or a senior executive. For me, throughout my career, it's really been about hard work and attention to detail."
Frank joined NRCan in the '80s, first working on the deregulation of the energy markets imposed by the National Energy Program. Shortly after, he got to work on the energy chapter of the Canada-U.S. free trade agreement and the later North American Free Trade Agreement with the inclusion of Mexico. He was also exposed to trade disputes with U.S. and select states. Frank's key takeaway from that time was never to underestimate the role of government in business.
In the '90s, Frank joined Amoco Canada, predecessor to BP Canada, and quickly ascended. He's held the roles of president and CEO for BP Canada Energy Company in Calgary; president of BP's North America Gas and Power business based in Houston; and, most recently, chief executive of Global Oil Europe and Finance for BP in London.
Of late, Frank has been feeling like he's back at NRCan dealing with market deregulation. A major impediment to TimberWest's growth hopes is B.C.'s controversial restrictions on log exports. Timber harvested in B.C. must be manufactured in B.C., as required under the Forest Act. However, exemptions may be given if the logs are determined to be surplus to domestic market requirements. Proponents state the restriction promotes local mills and jobs; opponents counter local mills price logs below market value and sometimes below cost.
"Export markets generate a premium," said David Elstone, analyst with ERA Forest Products Research. "One of the biggest issues for TimberWest is lack of open access to markets with restrictions on log exports. [It] can't fully access the market and the true global price for the value of their wood."
For the Led Zeppelin fan, it's The Song Remains The Same for Frank.
"So, here I come 25 years later [from NRCan] into a company in the forestry business in B.C. and one of the first things I see is that we have export restrictions on logs. We got rid of that 25 years ago in the energy sector. I was stunned," said Frank, who added he wouldn't be shy about taking an advocacy role.
"Needless to say, I'm a big believer in free markets, free trade and efficient allocation of resources and the right price signals because it results in better outcomes."
