- Book value on land and forest assets of 20.829,8 (19.228) TEUR
- Owners’ Equity per share was 1,06 (1,03) EUR
- Earnings per share was 0,0039 EUR
- Property holdings of 9.368 (8.590) hectare
- Timber volume was 929.525 (825.000) cubic meter
- Sales of 10,5 (7,1) TEUR
- Operating profit shows -85,7 (-46,9) TEUR
- Increase in forest value of 179,2 (359,9) TEUR
- Net profit was 62,0 (236,6) TEUR
- Planned fellings have been postponed due to a week market during the period
(Figures in brackets show corresponding period previous year)
Latvian Forest Company
Latvian Forest Company AB (public) is a Swedish listed Company investing in and operating forestry on favourable valued forests in Latvia. The three main basics of the business are, besides forest being a sought after real asset which grows by its own power.
- An expected increase in price levels for Latvian forest and agricultural properties
- To create value increase through active forest management
- To create value gains by building a larger property portfolio
The expansion is financed by new share issues as real estate is acquired and operations are being developed. The shareholders will through Latvian Forest Company become partners in many properties instead of an individual – resulting in good risk spreading. The activities undertaken in the ongoing forestry create the necessary revenue over time to cover the company’s costs and eventually generate a surplus.
Latvian Forest Company AB has Euro as the accounting currency and all reporting is in Euro. Stock trading in the marketplace for shares, Aktietorget, takes place in Swedish kronor.
Status and property ownership
Investments in forest properties have taken place continuously, and the holdings at the end of the period totalled 9.368 (8.590) hectares. Of these, 6.860 (6.154) were forests and 2.508 (2.436) other land including 1.814 agriculture land. The total growing stock was estimated to be approximately 929.525 (825.000) cubic meters after completed fellings and property sales.
The company management has not made any new investments in single properties during the first quarter. Time has been spent planning for the company’s future finance strategy, which will be coordinated in time with possible supply on the market. The company management still holds the opinion that the terms are favourable for acquisition of single properties, since the smaller local and some foreign property owners have problems with liquidity due to a week timber market.
Turnover and result
Revenue for the first quarter amounted to 10,5 (7,1) TEUR and mainly relates to revenue from lease of agricultural land. The costs for current operations have continued to develop satisfactorily. The increase in external costs during the first quarter, 68,5 (34,1) TEUR, is explained by a more active effort of forest management and larger forest possession.
The estimated real value of forest assets totalled 13.347 (12.261) TEUR. Estimated fair value of the forest assets was 14.232 (13.347) TEUR. The increase in value is mainly due to the purchase of property and the new calculations from the Latvian Forest Board, which show a total estimated timber volume of 929.000 cubic meters.
Otherwise, the result of operations is affected by normal costs for clearance, property related costs, such as new real estate measurements, inventories and stamping of stocks prior to felling, as well as certain costs associated with felling.
External costs consist largely of other purchased services in connection with forest management, other consulting services such as accounting, auditing, legal advice, as well as travel, rent and transportation costs, etc. Variable cost for purchase commissions etc. has in part been booked as part of the acquisition cost of the individual properties and in these cases do not charge the result. Other variable remuneration for management and cleaning are recorded under commodities and supplies (previously cost of goods sold).
Felling and cleaning
Due to a weaker timber market, felling volume did not reach the planned level for the first quarter 2017.
The company has decided on a felling volume of 10.000 cubic meters during the second and third quarters depending on market recovery. During the first quarter, documentation has been prepared and application made for a felling permit of volumes mentioned, which has been mandated by The National Board of Forestry.
A total of almost 45 hectare has been cleared during the first quarter. Further, forest inventory including marking of forest trail, valuation of diameter of standing forest timber for sale, a plan for planting has been made as well as mark-up of ecological trees. Ecological trees shall be exempt from felling because of their ecological value.
Market
Latvia is one of Europe’s major producers and exporter of wood products. While the Scandinavian market primarily consists of long-term delivery contracts to the forest industry, Latvian timber, pulp wood and energy wood mainly trades on the spot market. A gradual change towards lesser volatility can be noticed.
The price of softwood timber, especially pine, but also to a certain extent spruce, has increased with 9,7% compared to the first quarter 2016. The price of softwood timber (ø26 cm) was around 62 EUR per cubic meter.
However, the price trend for wood pulp has stagnated or reduced compared to last year. The low energy prices have resulted in substantially lower fuel energy prices than expected. Price for aspen was around 25 EUR per cubic meter and around 30 EUR per cubic meter for pine.
Latvijas Finieris, one of the largest producer of veneer products in Europe, has a great influence on pricing on the local timber market. The prices for highest quality birch (A-veneer class) has also stagnated to around 99 EUR per cubic meter compared to 100,4 EUR in January 2016.
The expected increase in production capacity in the Baltics will have a positive impact on the markets of timber, wood pulp and especially energy forest on medium term. The new Metsä Woods veneer plant in the southern part of Estonia is expected to produce some 50.000 cubic meters of veneer per year, requiring around 170.000 cubic meters of birch (A-veneer class). This is a major contribution to the existing demand from Latvijas Finieris on 700.000 cubic meters of the same quality.
Latvian Forest Company is dependent on the development on the timber market in the way the current sales depend on what prices can be obtained from time to time. Timber prices are reflected in the price of property, although property is more affected by the expected long-term development, while timber price is influenced by short-term circumstances such as bad weather or similar.
Financing
No new share issues have been made and no new loans have been raised.
Financial strategy
The Board has, following the views and probing among various shareholders and potential investors, decided that future funding in the form of new share issues will primarily take place with preference for existing shareholders. However, this does not prevent directed share issues from being completed, for example, when acquiring real estate portfolios or in special situations where a directed share issue may be required. The objective is for existing shareholders not to be at disadvantage if a directed share issue is made.
Share
Share capital at the end of period amounted to 1.776.014 EUR divided into 80.000 A-shares and 15.776.792 B-shares. A-shares represent ten votes and B-shares one vote each. Each share represents 0,112 Euro (1,0 SEK) in share capital. The five largest shareholders, according to the latest data, control 40,5% of the share capital and 40,9% of the votes.
Market
The market for forest properties in Latvia is characterized of consisting of many small properties between 5 and 40 hectares. Forest properties in Latvia are mostly divided into many owners. This is to a great deal due to the privatisation and land reform that took place after the collapse of the Soviet Union. After the freedom war (during the 1920s), land was distributed from the Baltic nobility, to the participants in the freedom war. In general, a bigger and more geographically aggregated possession is more valuable than others. The price for a single property depends, of course, on growing stock, age and quality, but as a rule prices in Latvia only amounts to 20-40 % of the Swedish ones.
Single properties are mostly sold at a lower price than larger package and/or aggregate holdings. Larger possessions are often more attractive for bigger forest companies, larger investors or institutional capital such as pension funds. Latvian Forest Company has as an integrated part of its strategy to build such possessions that may be of interest for earlier mentioned actors.
Events after the end of the period
The property holdings amount to 9.368 (8.590) hectares at the time of this report.
Next report
Interim report for the period January – June 2017 is scheduled for publication on August 23, 2017.
Annual report and annual general meeting
Notice for annual general meeting on June 16, 2017 has been made. Annual report and respective material will be available latest two weeks before the meeting.
Accounting principle
This interim report has been prepared for the Group in accordance with IFRS (International Financial Reporting Standards) as adopted by the EU, RFR 1 Supplementary Accounting Rules for Groups and the Swedish Annual Accounts Act. The parent company’s accounts have been prepared in accordance with RFR 2 Accounting for Legal Entities and the Swedish Annual Accounts Act.
About this report
This report has not been subject to special review by the company’s auditors.
Stockholm, 2017-05-22
The Board
For further information please contact
Aleksandrs Tralmaks, CEO
+37129203972
Visit our website: www.latvianforest.se