Six Years After Startup Katerra Digs Too Deep Of A Hole

Six Years After Startup Katerra Digs Too Deep Of A Hole

SIX YEARS AFTER STARTUP KATERRA DIGS TOO DEEP OF A HOLE

 

A “Silicon Valley” startup company that intended to redefine the methods of operation of the conventional housing and building construction industry has gone bankrupt and appears to be headed for bidding in late July 2021.

Katerra, which sought to become the ultimate turnkey provider—including the self-manufacture of cross-laminated timber and building components such as windows and cabinets, architectural design and engineering services, in-house supply chain, off-site assembly of structural sections, and on-site modular assembly with company construction crews, filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas on June 6.

A day later the court released a bidding and possible auction schedule commencing in late July for the U.S. assets of Katerra and its affiliates, including the new cross-laminated timber facility in Spokane, Wash.

The company had stated upon the bankruptcy filing it was taking steps to conduct a “marketing and sale process,” while having secured $35 million in Debtor-in-Possession (DIP) financing to fund operations during the Chapter 11 process. The company’s international operations are reportedly not part of the filing.

The amount is a far cry from the $3 billion Katerra raised in equity investments, much of it through Tokyo-based holdings company Softbank and its venture capital fund.

In the bankruptcy filing Katerra estimated liabilities of $1 billion to $10 billion and assets of $500 million to $1 billion. Katerra said that many of its U.S. projects will be demobilizing. It directly employed 500 at the time of the filing.

“The rapid deterioration of the company’s financial position is the result of the macroeconomic effects of the COVID-19 pandemic on the construction industry, inability to procure bonding for construction projects following the unexpected insolvency proceedings of Katerra’s former lender, and unsuccessful attempts to secure additional capital and business,” the company states.

Two casualties appear to be Katerra’s new CLT manufacturing facility in Spokane, Wash. and new components manufacturing facility in Tracy, Calif. The $150 million, 270,000 square foot CLT facility commissioned in May 2019 and includes the latest CLT manufacturing technology. The 577,000 square foot, robotics-driven components facility in Tracy was just starting up. It had prompted Katerra to shut down its older components plant in Phoenix, Ariz.

A source close to the situation says Katerra was too diverse for a startup. “They tried to self-perform too many specialties from the get-go—not only multi-unit construction and CLT, but also architecture, bathroom fixture design, HVAC design, window manufacturing, global projects such as Saudi Arabia and India, etc. As for CLT, the rapid escalation in lumber prices made the system cost-prohibitive for all but a few projects.”

Indeed the unprecedented launching of lumber prices (CLT is composed of 2 in. lumber) was a scenario few could have predicted to such degree; however, another industry observed asked the simple question: Why didn’t Katerra build a sawmill to have better control over their raw material intake and pricing? After all, they bought about everything else. Another observer says the topic of building a sawmill did come up, but he wasn’t sure if Katerra ever asked for or received a quote on the construction of a sawmill. The CLT plant itself appeared to be operating satisfactorily when it had to shut down.

The Katerra startup in 2015 was led by a capital funding specialist named Michael Marks who had success leading electronics technology company Flextronics International, and Fritz Wolff, a third-generation executive chairman of a multi-billion dollar real estate development and investment business, The Wolff Company, which was founded and operated in Spokane until moving headquarters to Scottsdale, Ariz. (Katerra apparently built the plant in Spokane to create jobs for the community where Wolff was from.)

The new venture wasn’t shy about wanting to shake up—and speed up—the conventional construction industry. In addition to starting up manufacturing plants, it bought everything from architectural firms, to construction firms to dirt contractors. But many of the projects it entered into appeared to experience the same hiccups and cost overruns that conventional on-site construction projects sometimes encounter, and perhaps with less quality, as Katerra tacked on substantial costs related to re-work issues.

“They were arrogant people from Silicon Valley that thought everyone in the lumber business and construction industries were idiots,” another observer comments. “They thought all they had to do was show up and they would dominate. They told everyone they were a tech company and because of that their valuation was many times greater. But when people looked under the hood they saw no technology, just a bloated company with ideas that weren’t based in reality.”

Katerra reportedly experienced nearly $2.8 billion in financial losses in 2018, 2019 and 2020. Unprofitable projects continued to mount right up until the bankruptcy.

Katerra replaced Marks as CEO in spring 2020, only a year after Marks hosted the first Katerra TAKE OFF product launch event, which included building platforms, Apollo software, CLT product line, energy and electrical platforms, HVAC, interior fixtures and even a bath kit.

In May three senior members of the Katerra management team resigned and the company formed a committee to seek alternative financing, market certain assets and basically restructure the company. But no investor was willing to provide the financing and the company faced a critical liquidity shortfall and negative cash balance.

On June 1 Katerra ceased a majority of its operations in the U.S., which resulted in winding down more than 80 projects representing 77% of its active project revenue. It terminated 730 of its 1,300 employees in the U.S.

The bidding procedure, if approved, will be a stalking-horse bid scheduled to begin July 22, from which Katerra will choose a bid from a pool of bidders as the initial bid that sets the low-end bid. In the ensuing days other bidders may submit higher bids with the highest bidder winning the assets. If the bidding process doesn’t work out, the process can move to an auction format. The current proposed schedule is for the sale to close in mid-August.

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Happy 25th Birthday Chopin Plywood

Happy 25th Birthday Chopin Plywood

Happy 25th Birthday Chopin Plywood

 

RoyOMartin commemorated 25 years of operations at its plywood manufacturing facility in Chopin, La. with a ceremony featuring a look back at the beginning stages of the plant and the impact it has had on the company and community since its inception.

Construction began in August 1994 on the Natchitoches Parish mill, which continues to be one of the largest of its kind in North America. Its first press load of southern yellow pine plywood panels was produced on March 8, 1996. The mill was the cover story for the November 1996 issue of Panel World.

Actually then president, the late Johnny Martin had drawn up a new pine sawmill to take advantage of the company’s substantial pine timberland coming of age, but the more Martin and his team looked at the situation, the clearer it became that a softwood plywood plant was the answer. “We felt in the long term that plywood had some inherent advantages over solid wood, mainly from a wood utilization standpoint,” Martin told Panel World in 1996. The plant itself at startup boasted a little more than 400,000 sq. ft. of manufacturing space. “We really wanted to put forth a first class facility,” Martin said.

In the past 25 years, employment has more than doubled, leading to a substantial economic impact on the region.

The 24/7 operation manufactures a variety of SmartCore branded plywood panels, as well as timbers, boards, and specialty products—all sold throughout the U.S. and, in some cases, around the world.

“We didn’t want to build a plant that made rated sheathing like everybody else,” stated Chairman, CEO and CFO Roy O. Martin III. “We decided, way back then, we were going to build a state-of-the-art finishing end to make the kind of products that are built to last. We started with one lathe and 330 people. Now we have two lathes, 720 people, a timber mill, and a forestry office. That’s some growth.”

Thirty-five current employees from the original startup team were honored for their 25 years of service to the company. COO E. Scott Poole commented, “We may have added equipment through the years, but none of that makes this history worth celebrating until we add the dedication of the men and women who have stood through the good and not-so-good times. We are the best because of them.”

Also honored at the event was Joe Mackay, who served as vice president of plywood for nearly 20 years. “Joe has made an invaluable impact on the organization,” said Martin as he presented Mackay with the Leadership Award. “He is a true industry leader.”

Regarding the anniversary, Vice President of Plywood Jeremy Burford stated, “What we are most proud of is our reputation in the wood products industry for taking care of our people through world-class safety and wellness programming, unmatched employee benefits, and our self-directed advancement program. The entire plywood team continues to demonstrate its commitment to working safely, operating at top efficiency, and satisfying customers every single day.”

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Arauco Closing Eugene MDF

Arauco Closing Eugene MDF

ARAUCO announced it is closing its medium density fiberboard (MDF) production facility in Eugene, Ore. as of May 1. ARAUCO states it will continue to support customers from its other facilities, and that the decision was based on an assessment over several years that the older manufacturing platform was less competitive compared to the company’s other more advanced MDF platforms.

“Decisions regarding plant closures are difficult,” says Pablo Franzini, president of ARAUCO North America. “We are working diligently to provide options for Eugene employees to help them through a difficult transition. We are committed to meeting our customers’ needs from our other facilities.”

A month earlier ARAUCO announced it is closing its particleboard line in Moncure, NC Carolina as of April. It cited similar reasons.

ARAUCO’s Moncure MDF line will be integrated with a molding line to create an advanced MDF millwork operation that will drive efficiencies and support the company’s commitment to provide customers with value-added products. “The new investment will strengthen our millwork footprint to better serve our customers,” Franzini says.

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The monthly Panel World Industry Newsletter reaches over 3,000 who represent primary panel production operations.

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Roseburg Gets Chester Rolling

Roseburg Gets Chester Rolling

Roseburg Gets Chester Rolling

Roseburg Forest Products held a ribbon-cutting ceremony on October 28 to celebrate the grand opening of its newly constructed engineered wood products plant in Chester, SC. South Carolina Governor Henry McMaster participated in the event along with Roseburg President and CEO Grady Mulbery and Roseburg owner and Chairman Allyn Ford.

The Chester Engineered Wood plant features the highest-capacity LVL (laminated veneer lumber) press in the world. The project was first announced in summer 2017 and the construction team broke ground later that year. When fully operational, the plant will employ at least 145.

The Chester facility will produce LVL headers and beams used in residential and commercial construction. Roseburg first established its engineered wood business in 2001 and currently manufactures RFPI Joists, RigidLam LVL and RigidRim rimboard at its engineered wood products plant in Riddle, Ore.

Roseburg did extensive research prior to choosing a location for the new plant, with criteria including market demand, raw materials availability and cost, and business climate. Roseburg clients in the Eastern U.S. will now have access to a stable supply of high quality LVL products.

“South Carolina is a great state to do business in,” Roseburg President and CEO Grady Mulbery says. “Our research showed that this region was an ideal place to locate this facility, with its steady demand, healthy market and bountiful wood supply. Chester County and the state of South Carolina stood out, offering outstanding support and assistance as we navigated through the process.”

Attendees at the ceremony included state and local politicians, regional officials, and more than 100 recently hired plant employees. After the ribbon cutting, project leaders guided guests on a tour of the expansive manufacturing plant, which produced its first board on September 19.

“What started out as an undeveloped plot of land is now home to a state-of-the-art manufacturing facility thanks to the efforts of a team of people with the vision and knowledge to make it happen,” comments Allyn Ford, Roseburg owner and chairman. “Because of those efforts, 145 people will have jobs that did not exist before, and 145 families will earn a stable income in a safe work environment that contributes to the overall health and prosperity of this community and this state.”

Upon full production, the line will produce up to 285,000 m³ of LVL per year, made possible by microwave preheating and continuous press technology. Dieffenbacher supplied the LVL press and the upstream 600 kW microwave.

To produce high quality LVL, the veneers are evenly heated in the microwave over the entire mat thickness. The special design of the Dieffenbacher CPS press infeed means the distance the mat has to travel “without pressure” upon leaving the microwave until reaching the maximum pressing pressure is less than 2,500 mm. This prevents pre-curing of the resin. Fast-hardening glue can be used to increase production speed and capacity.

In addition to boosting capacity, the ideal combination of microwave and CPS also enhances board quality. The continuously produced LVL boards have more consistent mechanical board properties and significantly lower thickness tolerances. Subsequent sanding is not necessary. For example, unsanded LVL boards can be used directly as scaffolding planks, and unsanded veneers can easily be pressed into high quality boards.

Dieffenbacher LVL technology reportedly enables board thicknesses of up to 120 mm and allows MUF adhesives to be used in the top veneer overlapping area. The Roseburg line in Chester is Dieffenbacher’s eighth LVL project with a continuous press.

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The monthly Panel World Industry Newsletter reaches over 3,000 who represent primary panel production operations.

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Certification Comes Under Fire

Certification Comes Under Fire

Nine U.S. domestic plywood producers, calling themselves the U.S. Structural Plywood Integrity Coalition, have filed a Lanham Act claim of false advertising against three U.S. certification bodies: PFS-TECO, Timber Products Inspection and International Accreditation Service. The essential point of the claim is that structural plywood panels produced in Southern Brazil are being fraudulently stamped as compliant with U.S. Product Standard PS1-09 for structural plywood, when the panels in fact do not meet minimum structural requirements for stiffness and deflection, according to the coalition’s claim.

The complaint, which was filed with the United States District Court for the Southern District of Florida (Fort Lauderdale Division), seeks preliminary and permanent injunctions requiring PFS-TEC and TPI to immediately revoke the certifications of certain Brazil plywood producers to manufacture PS 1-09 structural plywood, and $300 million in damages from PFS-TECO, TPI and IAS, plus any additional amounts proven at a trial by jury.

“The product standards for American plywood have serious real-world implications for all homes constructed using wood panel products,” explains Tyler Freres, VP of Sales with Freres Lumber. “Inferior products can endanger the health and safety of everyone who depends upon their homes to provide shelter and security for their families and loved ones. It is incumbent upon engineered wood products manufacturers to ensure that we meet all codes and that U.S. certification agencies have consumers’ health and safety as their primary concern when providing their certifications.”

The nine companies include: Freres Lumber, Coastal Plywood, Scotch Plywood, Veneer Products Acquisitions (Southern Veneer Products), Hunt Forest Products, Hardel Mutual Plywood, Murphy Co., SDS Lumber and Swanson Group.

They claim that 30 companies operating 35 plywood plants in two states in Southern Brazil (Paraná and Santa Catarina) are falsely stamping millions of square feet of structural plywood imported into the U.S. as meeting the U.S. Voluntary Product Standard PS 1-09 for structural plywood. They say that tests by the American Plywood Assn. in 2018 commissioned by the coalition show that the Brazilian plywood panels produced in Southern Brazil experience massive failure rates with respect to the stringent strength properties of the PS 1-09 standard, specifically bending stiffness and deflection.

They also claim that the testing demonstrates the PS 1-09 quality plywood cannot be consistently produced from the two fast-growing non-native plantation species, loblolly pine and slash pine, used by the Brazilian plywood producers.

“As the certifiers of all 35 Brazilian plywood plants exporting PS 1-09 stamped plywood panels to the U.S., defendants PFS-TECO and TPI provide the gateway into the United States for these falsely advertised panels,” the complaint states. “The only explanation for the pervasiveness of the false advertising and the number of years over which it has persisted, is the intentional or negligent failure of PFS-TECO and TPI to rigorously perform their certification obligations…” The complaint also says that International Accreditation Services, as the accreditor of PSF-TECO and TPI, “has been grossly negligent in failing to perform its accreditation function.”

The complaint says that consequently millions of square feet of “falsely advertised off-grade Brazilian plywood” has moved into the U.S. and is being incorporated into residential and commercial buildings. “U.S. residents who live or work in (these buildings) are exposed to significant risk of serious injury or death, particularly in the event of a hurricane or significant earthquake.”

In a September statement PFS-TECO says it intends to vigorously defend its reputation, says the coalition’s testing approach is not permitted to be used under PS 1-09 as an alternative to conducting the uniform load test, and notes that PSF-TECO has more than 15 years of data showing that plywood from Southern Brazil and produced by those manufacturing facilities certified by PFS-TECO can meet PS 1 requirements.

Timber Products Inspection says the allegations in the lawsuit are absolutely false. “Despite the claims of the plaintiffs, our experience and testing indicate that Brazilian plywood meets all objective industry and regulatory standards outlined by the PS 1-09 standard. Clients in Brazil and elsewhere who do not consistently meet the applicable industry standard do not remain as TP clients. In 50 years of service, TP has never been accused of such negligence and we stand by our team, our clients and our processes. We intend to vigorously defend our reputation in court—and as necessary, in public—in the months ahead.”

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Find Us On Social

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The monthly Panel World Industry Newsletter reaches over 3,000 who represent primary panel production operations.

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Panel World is delivered six times per year to North American and international professionals, who represent primary panel production operations. Subscriptions are FREE to qualified individuals.

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U.S. Court Says China At Fault

U.S. Court Says China At Fault

U.S. Court Says China At Fault

 

U.S. Court of International Trade in June upheld a U.S. International Trade Commission determination that the People’s Republic of China is injuring the U.S. hardwood plywood industry by exporting hardwood plywood supported by unfair subsidies and selling it at below market value (otherwise known as dumping) in the U.S.

The decision stems from a petition filed by the Coalition for Fair Trade of Hardwood Plywood with the U.S. Dept. of Commerce and ITC in November 2016. In its preliminary determination, Commerce found that hardwood plywood from the PRC was being sold at less than fair value and that the PRC industry was receiving countervailable subsidies.

Concurrent with Commerce’s proceedings, the ITC investigated whether the domestic industry was materially injured or threatened with material injury by the imports. ITC issued a preliminary determination find that there was reasonable indication of injury to the U.S. industry, and subsequently in a final determination concluded that the U.S. hardwood plywood industry is materially injured by the PRC imports because they’re subsidized and sold in the U.S. at less than fair value.

The Coalition for Fair Trade of Hardwood Plywood includes Columbia Forest Products, Commonwealth Plywood, Murphy Company, Roseburg Forest Products, States Industries and Timber Products Co., all domestic producers of hardwood plywood.

American Alliance for Hardwood Plywood and related companies subsequently challenged aspects of the ITC final determination of injury. These companies include Far East American, Inc., Northwest Hardwoods, American Pacific Plywood, Canusa Wood Products, Concannon Lumber and Plywood, Fabuwood Cabinetry Corp., Hardwoods Specialty Products, Holland Southwest International, Liberty Wood International, McCorry & Co., MJB Wood Group, Patrioit Tmber Products, Richmond International Forest Products, Taraca Pacific, USPly Trade Co. and Wood Brokerage International. A separate complaint against the ITC ruling was filed by Zhejiang Dehua TB Import & Export Co. and affiliated plaintiffs.

The complaints against the ITC injury determination challenged the ITC’s findings that imports from PRC are substitutable with domestic hardwood plywood; that the volume of imports from PRC are significant; that imports from PRC undersold domestic hardwood plywood and resulted in price suppression; that imports from PRC significantly impacted the domestic industry.

U.S. Court of International Trade denounced these challenges and upheld the ITC determination of injury. On the specific challenge as to the degree of volume of imports from PRC, the Court pointed to the ITC finding that between 2014 and 2016 the market share of imports from PRC increased from 37.9% to 40.1%, while the domestic industry decreased from 21% to 17.3%. And specifically in the cabenetry end use segment, hardwood plywood imports from China increased from 224MMSF to 301MMSF, increasing its market share by 6.9%, while the domestic market share decreased by 5.1%.

The Court emphasized that ITC overall noted that the domestic industry’s production, capacity utilization, end-of-period inventories, shipments and market share all declined during the investigation period, as did net sales revenues, cost of goods sold, ratio of operating incomes to net sales, gross profit, operating income and net income.

 

Latest News

First CLT Office Opens In DC

Opened in fall 2022, the first mass timber commercial building in the U.S. capital city features more than 108,000 sq. ft. of mass timber. The building is an innovative retrofit at 80 M Street SE in Washington, DC: Termed an overbuild—extra stories atop an existing building—the expansion features three floors, where columns of mass timber are visible from the interior…

All Said And Done: Fifty Speakers Brought Their Expertise To PELICE

PART FOUR: This is the fourth of a four-part series summarizing the presentations delivered during the Panel & Engineered Lumber International Conference & Expo (PELICE) held this spring and hosted by Panel World in Atlanta March 31 to April 1. The first three parts appeared in the May, July and September issues. PELICE 2024 will be held March 14-15, 2024 again at the Omni Hotel at CNN Center in Atlanta…

Panel Industry Moves Ahead

Article by Rich Donnell, Editor-In-Chief, Panel World November 2022 – As I glanced through the pages of the six issues of Panel World in 2022, various news developments refreshed my memory, but underlying it all was just the fact that business for the most part was conducted as usual. That we were back to…

Find Us On Social

Newsletter

The monthly Panel World Industry Newsletter reaches over 3,000 who represent primary panel production operations.

Subscribe/Renew

Panel World is delivered six times per year to North American and international professionals, who represent primary panel production operations. Subscriptions are FREE to qualified individuals.

Advertise

Complete the online form so we can direct you to the appropriate Sales Representative. Contact us today!