The banks that granted the loans suffered the biggest damage, but virtually all other timber companies were impacted, too. For the past year, the latter have had to explain to their banks whether or not they are in as dire straits as Ziegler.
Sole owner decided on everything
At its core, the Ziegler case has nothing to do with the challenges facing the timber industry. Rather, it is the result of one person’s hubris. The owner deciding on everything is understandable and appropriate for a family business with just a few dozen employees. However, it can be disastrous if this type of management structure is applied to a company with 3,200 employees. The company’s downfall is inevitable when it ends up comprising 40 companies in over a dozen sectors – many of them far from the company’s core business.
The Ziegler Group did not have an organizational structure that was commensurate with the complexity and size of the company. All decisions regarding the 40 subsidiaries were made by one person: Stefan Ziegler. “We had been discussing things for days, then Stefan came in, listened for five minutes, and made his decision,” one person involved said, referring to what went on behind the scenes of the €150-million investment in the wood fiber insulation board factory. What was then described as a sign of exceptionally quick judgment now appears in a completely different light. Many others would have conducted several months of due diligence, which the owner would then have examined thoroughly without haste.
Would I do it again? Yes!
New building far too small soon after opening
In October 2021, the Ziegler Group invited trade journalists to Plößberg. The occasion was the announcement of the construction of a wood fiber insulation board plant. The journalists were greeted with the statement that the award-winning office building was already too small despite being only a few months old. “We have to build another one,” Andreas Sandner, then managing director and Stefan Ziegler's right-hand man, stated verbatim. And although further investments of €400 million were being considered, it was announced: “We need to increase our cutting capacity.” Initially, Ziegler had planned to acquire a sawmill in Slovakia – but the deal fell through at the last minute. Three years later, the company bought three sawmills: one in Romania and two in Sweden.
2021 was a year of exaggeration, which the Holzkurier dubbed the “year of the century”. Ziegler’s annual profit jumped from the usual €15 million (profit margin: 5%) to €92 million (profit margin: 22%).
2021 as base for following years
While other companies were building up reserves, Ziegler went all out. Everything that followed was almost surreal. It seemed as if Ziegler was expecting that every subsequent year would be like 2021. And he managed to convey this market perspective to the lending banks. In August 2021, ten banks formed a consortium that granted the Ziegler Group €650 million, or as many as €688 million including interest.
In the insolvency proceedings, this figure rose to €680 million, which the insolvency administrator labeled a complete financial loss. The fact that Ziegler managed to obtain such an astronomical sum can only mean that there was no adequate due diligence.
Banks believed forecasts believed, ignored global crises
Apparently, no bank seemed to have questioned the extrapolation of the dream figures of 2021/2022. However, such exceptional situations do not occur year after year. The banks believed Ziegler’s forecasts up to 2023, i.e. that things would continue as they had in 2021 and 2022 – and this despite the fact that since then, the invasion of Ukraine, interest rate hikes, and exploding energy costs have emerged as negative factors.
Dream price paid
In 2023, the loan granted by the consortium was increased again. Deutsche Bank joined and was sort of “late to the party”, whereas the Bank für Tirol und Vorarlberg left the consortium at the same time. In 2023, the consortium agreement was amended to include a note about a “Declaration of accession Romania” concerning the financing of the acquisition of the HS Timber sawmill in Sebes, Romania. According to PWC sales documents, Ziegler transferred €215 million to HS Timber in August 2023 – a price that was already considered far too high at the time. On November 12, Kronospan acquired the sawmill in Sebes for a reported third of that price.
The purchase of two sawmills in Sweden in 2022 was even more extreme: not because of the purchase price, but in relation to the age and value of the acquired facilities. Purchase price: €113 million according to PWC sales documents.
“Everything” leased
In early 2024, the €650 million in loans granted by the consortium were not the only burden on the group. According to Oberpfalz-Medien, auditors also identified around €300 million in lease liabilities. A significant portion of the plants, real estate, land, and machinery had previously been sold and leased back. Sale and leaseback is not uncommon in the timber industry. However, the one in question was on a different scale. “Everything that wasn’t nailed down was leased,” a source told the Holzkurier. Including other loan positions, liabilities thus totaled almost €1 billion.
No financial control
During restructuring negotiations with the banks, it was agreed, as demanded by the banks, that external management had to be brought in. First, a restructuring expert (CRO – Chief Restructuring Officer) was brought on board in July 2024. The CRO, in turn, immediately decided to hire a Chief Financial Officer (CFO) with the banks’ support.
The sale of the insulation board plant failing shortly before the contract was signed made the situation much worse. The sale would have considerably improved the chances of rescuing the group. In addition, the negative effects of the construction crisis were more severe than anticipated, with a correspondingly negative impact on sales revenue and higher raw material prices (log wood).
One bank’s withdrawal was the end
The restructuring plan, which had also been coordinated with the banks, included the divestment of non-core business units and assets and a focus on the core business. A clear roadmap outlined what was to be sold and by when, with various project teams working on that. The withdrawal of Commerzbank via a telephone conference in November 2024 came as a complete surprise to all parties involved, including the other banks in the consortium, as insiders comment. From that point on, the company was under emergency management, and insolvency was virtually unavoidable.
So much money, but nothing for Plößberg
It is surprising how easily Ziegler was able to access so much capital. The fact that so little was invested in the heart of the company is equally surprising. The sawmill equipment in Plößberg is old. Although most of them were purchased used, five lines, which have been running for decades, are inefficient. This could have been remedied with a comparatively small investment. €0 for Plößberg, but €150 million for wood fiber insulation boards – that was the balancing act that weakened the entire structure.
Investing in additional drying capacity alone would have significantly eased the sales situation, as the high proportion of undried goods made the company less flexible and cheaper. For buyers, everything became even cheaper as liquidity pressure increased. Starving the core business accelerated the downward spiral.
