- Book value of land and forest amounts to TEUR 40,397 (39,397)
- Equity amounts to EUR 0.881 (0.91) per share
- Earnings per share EUR -0.030 (-0.002)
- Property holdings amounts to 8,287 (7,868) hectares
- Timber volume is estimated at 1,187,000 (1,142,857) cubic meters
- Net sales were TEUR 176.1 (64.2)
- Operating EBIT was TEUR -99.3 (-120.4)
- Change in value, forest TEUR -924.3 (24.1)
Net result amounted to TEUR -1,117.7 (-77.7)
(Data in brackets refer to the corresponding period last year)
Latvian Forest Company
Latvian Forest Company AB (publ) is a Swedish listed company that invests in and conducts forestry on favourably valued forest in countries around the Baltic Sea. The three main foundations of the business are, in addition to the fact that forest is a sought-after asset that grows by its own power,
- an expected increase in the price levels of Latvian forest and agricultural properties.
- value creation for shareholders through active forest management.
- to create value by building up a larger property portfolio.
The expansion is financed by carrying out new issues in stages as properties are acquired and the business develops. Through Latvian Forest Company, shareholders become owners in many properties instead of an individual one, which provides a good spread of risk. The operations conducted in the day-to-day forestry create the turnover needed to cover the company’s costs over time and in the long term generate a surplus.
Latvian Forest Company AB has Euro as its accounting currency and all reporting is done in Euro. Trading in the share on Spotlight Stock Market takes place in Swedish kronor. The Board of Directors decided to apply for listing on NGM Nordic SME on May 15, 2024. The goal is to carry out the list change in the second quarter of 2024.
Status & property holdings
Investments in forest properties have been made continuously and the holdings at the end of the period totalled 8,287 (7,868) hectares. Of these, 6,660 (6,469) were forest, 1,610 (1,406) other land, including 1,066 (938) agricultural land. At the same time, the total growing stock was estimated at 1,187,000 (1,143,000) cubic meters after felling and property sales.
On the 6,660 hectares of forest land owned by the company at the end of this period, the existing growing stock is estimated at 1.187,000 m3. According to updated information, the company management estimates that there are 178 m3 of growing forest per hectare. Over 70% of the company holdings consist of land types corresponding to bonity classes IA, I and II. Only 0.6% of the company holdings have management measures prohibited due to nature conservation restrictions. More than 70% of the growing stock consists of the three most important industrial woods: birch, pine, and spruce.
(Map of existing property holdings)
A more detailed description of the company holdings is available on the company’s website with a link here: www.latvianforest.se
Felling and clearing
During the first quarter, the company has sold felling rights or felled a total of 4,940 cubic meters. The average felling price was EUR 38.12 per cubic meter with an income of TEUR 186. The company has carried out clearing on a total of 167.27 hectares during the first quarter.
(Thirteen-year-old planting of spruce and oak on farmland in Lithuania)
Sales and earnings
Sales in the first quarter amounted to TEUR 176.1 (64.2) and refers to income from felling, i.e. the sales of root items. Operating EBIT was negative, TEUR -99.3 (-120.4) for the first quarter. The company paid TEUR 62 attributable to investments in the long-term improvement of forest assets. The Management believes that write-downs of these costs through income recognition is a more effective way to reflect these investments. Net result for the period was TEUR -1,117.7 (-77.7). The decline in the value of forest assets is partly due to the fact that the growing stock has changed since 2023 and the company has assumed a more cautious price development to calculate the present value of biological assets.
The estimated fair value of the forest assets amounted to TEUR 30,306 (29,905). In total, the value of the non-current assets amounted to TEUR 40,397 (39,397).
Otherwise, the result is affected by normal costs for clearing, property-related costs such as new property measurements, inventories and stamping of stocks prior to felling, as well as certain costs associated with felling.
External costs largely consist of purchased services related to forest management, other consulting services such as accounting, auditing, legal advice, costs for travel, rent and transport. Variable costs for purchase commissions have to some extent been recorded as part of the acquisition cost for the individual properties and in these cases do not affect the result. Other variable compensations for clearing are recorded under raw materials and supplies (previously cost of goods sold). The total costs for the first quarter were TEUR 275.4 (200.4).
Timber and forest property market
There was weaker demand for wood products in the last twelve months, due to the general price level being adjusted by more than 30% on most of the assortment. That is still more than the price level before the corona pandemic. The company management is now observing the first signs of an increase in the purchase price of timber products in most Nordic markets.
The company management believes that the outlook for forest owners is positive in the longer term, considering that underlying demand in Europe is positively driven by wood construction, the need for packaging materials, and the pursuit of a sustainable energy sector and forests as the best alternative for carbon storage.
Timber futures trading on the NASDAQ stock exchange does not show much volatility unlike in 2022. Over the past twelve months, the price has stabilized around USD 500/MBFT.
The purchase price for softwood timber has remained fairly unchanged since it fell to a level corresponding to approx. EUR 90-100/m3 after record levels of EUR 155/m3 in mid-2022 on the Latvian and Lithuanian markets.
Similar tendencies can be observed in the development of the pulpwood market, where the purchase price for a cubic meter of birch pulpwood was approx. EUR 55 in the last 12 months. At its peak, the purchase price was EUR 125 per cubic meter in 2022.
The demand for birch veneer logs, and as a consequence also the purchase price, has not changed as dramatically as the other ranges. The current purchase price for premium birch veneer logs is around EUR 200 per cubic meter. The record level of EUR 232 per cubic meter at the end of 2022 can be explained by the fact that the lower quality veneer imported from Russia has disappeared from the market as a result of sanctions imposed by the G7 countries on Russian producers.
The geopolitical unrest has mostly been reflected in the price level of energy wood, including raw material for wood chips. When in 2021 the price of hardwood chips was around 8 EUR/cubic meter, it rose to the peak figure of 25 EUR per cubic meter, with correction to 16.5 EUR/cubic meter today.
However, LFC has been successful in acquiring new properties, as the company management actively uses its experience and knowledge to identify and acquire forest properties at a favourable price.
Financing
During the first quarter, no loans were taken out and no new issues were carried out.
Financing strategy
The Board of Directors has, following comments from and sounding among shareholders and potential investors, decided that future financing in the form of new share issues will primarily take place within the framework of new share issues with priority for existing shareholders. However, this does not prevent directed issues from being carried out, for example, in connection with acquisitions of property portfolios or in special situations where a directed issue may be required. The objective is that existing shareholders will not be disadvantaged if a directed share issue is carried out.
Share
At the end of the period, the share capital amounted to EUR 4,106,436 divided into 80,000 Class A shares and 36,583,521 Class B shares. Class A shares represent ten votes and Class B shares one vote each. Each share has a quota value of 0.112 Euro in share capital. According to the latest information, the five largest shareholders in terms of voting rights control 67.6% of the capital and 67.2% of the votes.
Significant events after the end of the period
On April 2, the Board of Directors of Latvian Forest Company AB (publ) resolved, based on the authorization granted by the Annual General Meeting, to carry out a new issue of Class B shares with preferential rights for the company’s shareholders. The issue comprised a total of approximately SEK 27.3 million. The purpose of the new share issue was to finance continued expansion through the acquisition of additional forest properties and the repayment of shareholder loans that have been used for forest property acquisitions previously.
In total, the rights issue comprised 3,333,047 new Class B shares and provided the company with SEK 27,330,985.40 before issue costs, which amounted to a total of approximately SEK 0.5 million. The rights issue was fully subscribed and therefore the number of shares will amount to 39,996,568 of which 39,916,568 are Class B shares, and the number of votes to 40,716,568.
On May 14, Latvian Forest Company AB applied for listing on NGM Nordic SME. The goal is to carry out the list change during the second quarter of 2024. The company management and board of directors are convinced that NGM, given where the company is today, will create opportunities for continued growth and will benefit shareholders with higher liquidity for share trading.
At the time of this report, the property holdings amount to 7,165 hectares. At the same time, the total growing stock was estimated at about 1,076,000 cubic meters after completed felling, property purchases and sales. The company has sold 476 hectares of agricultural and other land for EUR 1,340,410 in accordance with the previous efficiency plan.
(Cleared forest near Koknese, Latvia)
Next report
The half-year report for the period January to June 2024 is scheduled to be published on August 22, 2024.
Annual Report and Annual General Meeting
Notice of the Annual General Meeting shall be given, and the Annual Report and associated material will be available no later than two weeks prior to the Annual General Meeting.
About this report
This report has not been subject to special review by the company’s auditor.
Stockholm, 2024-05-27
Board
For further information, please contact:
Aleksandrs Tralmaks, CEO
+37129203972
Or visit our website: www.latvianforest.se
