Business idea and operations
Latvian Forest Company AB is a Swedish limited liability company that purchases and manages forest property in Latvia. The main business idea is to provide for the opportunity to take part in an expected rise in market prices for forest property in Latvia. It is primarily an increased value of the properties that is to generate returns for shareholders.
Business modell & strategy
Investments in property are financed with equity raised through share issues targeted toward existing shareholders as well as external investors. Share issues are carried out on a regular basis corresponding to the rate at which investments can be made. The rate of expansion, and thereby also financing needs, are dictated by the availability of suitable properties available for purchase.
Operations generate the cash flow necessary to finance daily activities. A significant portion of the costs incurred are variable and arise in connection with activities that generate turnover and cash-flow such as thinning, harvesting and other management activities. The objective is that as much as possible of the equity raised from investors is to be invested directly in forest property and not used for financing daily operations. Local labor and subcontractors are employed for management activities and harvesting. The parent company is Swedish and has Swedish management.
Profits generated in on-going operations are to be reinvested in new property as far as possible. If advantageous offers are received, property will be sold and profits will be realized.
Area of activity
Focus is primarily on the northern/northeastern region of Latvia around the area Valmiera. Prices are somewhat higher than farther to the east, but this is outweighed by the advantages of purchasing properties in this region. One is that the company has a well established network in the region as well as a solid understanding of the local market. Another is that the infrastructure is relatively well developed with proximity to customers and subcontractors.
The focus on Latvia has its origins in previous projects involving the founders and related parties. The experience gathered over the past ten years as well as existing networks have formed the basis for operations in Latvian Forest Company. Latvia has a favorable property structure. Many smaller properties as well as ownership distributed on many smaller, private owners, provides for opportunities in consolidating
ownership and creating larger property packages.
Latvia, like the other Baltic States, is an EU member and has a relatively stable and predictable legal system. The market for forest products is international and thus not directly dependent on the market development in Latvia.