INTERIM REPORT JAN-MAR 2019

INTERIM REPORT JAN-MAR 2019

Book value of fixed assets amounts to 24,733.2 (21,924.3) TEUR

• Equity amounts to 1,117 EUR (1,034) per share
• Earnings per share -0.028 (0.008) EUR
• Property holdings amount to 10,614 (9,665) hectares
• Timber volume is estimated to 1,015,000 (1,035,000) cubic meters
• Turnover was 75.2 (49.6) TEUR
• Operating profit was -541,7 (-111.2) TEUR
• Changes in forest value amounted to 0 (333.0) TEUR
• Profit/loss after tax amounted to -575.3 (155.2) TEUR

(Parentheses data refer to the corresponding period last year)

About the company:

Latvian Forest Company AB (publ) is a Swedish listed company that acquires, sells and conducts forestry on favorable valued forests in Latvia. The three main bases of the business are, in addition to forests being a sought-after real asset that 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 growth by building a larger property portfolio.

The expansion is financed by carrying out new issues in stages as properties are acquired and the business is developing. Through Latvian Forest Company, shareholders become partners in many properties instead of an individual, which provides a good risk spread. The activities carried out in current forestry create the turnover needed to cover the company’s costs over time and eventually generate a surplus.

Latvian Forest Company AB has Euro as accounting and reporting currency. Share trading takes place at Spotlight Market in Swedish kronor.

Status & Property holdings

On February 4, the Board of Directors has decided to sign a letter of intent with Svenska Cellulosa Aktiebolaget (SCA), on the sale of all shares in the operating subsidiaries SIA Latvijas Mezu Kompanija and Baltic Forest IV SIA. The value of the fixed assets is calculated provisionally at TEUR 26,263. This corresponds to the buyer’s estimate of the value of the total fixed assets of the two subsidiaries consisting mainly of forest and agricultural properties.

The purchase price for the shares amounted to the equity of the subsidiaries as of the date of entry corresponding to MEUR 16,7 adjusted for the difference between estimated and book value of the fixed assets. Certain reservation for any adjustments, which shall ultimately be determined by the parties within 30 business days in the share transfer agreement. These are provisionally estimated at TEUR 120 in favor of the Company. In addition, the parties have agreed that the buyer will repay shareholder loans equivalent to 9.4 MEUR. This corresponds to the value of the subsidiaries’ forest and agricultural properties of MEUR 26.2. Prior to access, the Company’s Board of Directors has decided to repay loan from Svenska Handelsbanken corresponding to TEUR 1,700 by taking up a short-term loan from Galjaden Fastigheter AB on March 25.

On March 27, the Company’s Extraordinary General Meeting decided to approve the sale of all shares in the subsidiaries SIA Latvijas Mezu Kompanija and Baltic Forest IV SIA. SCA Mezs Latvija, a wholly owned subsidiary of Svenska Cellulosa Aktiebolaget SCA, has taken up and paid the shares in SIA Latvijas Mezu Kompanija and Baltic Forest IV SIA on April 8, 2019.

At the end of the period, the holdings amounted to a total of 10,614 (9,665) hectares. Of these, 8,060 (7,181) were forest and 1,943 (1,828) agricultural land and 611 other land. At the same time, the total growing stock was estimated at approximately 1,015,000 (1,035,000) cubic meters after felling and purchases and sales of property. Reduction in timber stocks compared to the previous report can be explained by felling equivalent to approximately 40,000 cubic meters in 2018 and by the company conducting extensive revisions to timber stocks after the change of forest manager in the beginning of last Year.

During the first quarter, a total of approximately MEUR 0.14 was invested in 6 individual properties and 138 hectares with a growing stock of about 10,000 cubic meters acquired, of which about 5,000 are fellable. The average growing stock was about 123 cubic meters per hectare of forest land.

Turnover and earnings

Net sales for the period amounted to TEUR 75.2 (49.6) and relate mainly to revenue from felling.

Sales have resulted in a cost increase of TEUR 400. This was a one-off cost relating to costs for legal advisers, termination of the existing and previous forest management agreements, including increased personnel costs.

The estimated fair value of forest resources amounted to MEUR 16.52 (14.23). In total, the value of woodland and other land and the fair value of forest resources amounted to MEUR 24.73. SCA valued the subsidiaries forest and agricultural properties at MEUR 26,263, which is 6 % more than the book- value. No change in fair value for biological fixed assets has been made during the period.

Felling and clearing

During the first quarter, the company was only able to fell 1.261 cubic meters, which was only part of planned felling volumes, i.e. standing forest timber for sale. The average felling price was EUR 34.41 per cubic meter. In addition, the company received TEUR 20 in compensation from the power grid company that will carry out the construction of new power lines. Compensation relates to felling which must be made in connection with this. The company ceased felling when it signed the letter of intent with the buyer on February 4.

Financing

During the first quarter, no rights issues have been implemented. The company raised a loan of MSEK 21.5 from Galjaden Fastigheter AB in connection with a need to amortize loans from Svenska Handelsbanken on March 25 according to the agreement. This loan was repaid to Galjaden Fastigheter AB on April 9.

Financing Strategy

The Board of Directors continues to probe the various possibilities about the company’s future following the sale of the company’s operating subsidiaries. If the company will continue operations as a Swedish listed company that invests in and conducts forestry on favorable valued forest in Latvia, the Board of Directors will follow the previously adopted financing strategy.

Following comments from and probing among various shareholders and potential investors, the Board of Directors has decided that future financing in the form of rights issues will primarily take place within the framework of rights issues with preference for existing shareholders. However, this does not prevent targeted issues from being carried out in the event of the acquisition of property portfolios or in specific situations where a directed issue may be required. However, the aim is that existing shareholders should not be disadvantaged if a directed issue is implemented.

Shares

At the end of the period, the share capital amounted to EUR 2,297,307 divided into 80,000 Class A shares and 20,431,061 Class B shares. Class A shares represent ten votes and Class B shares one vote each. Each share represents EUR 0.112 (SEK 1.0) in share capital. According to the latest data, the five largest shareholders control 67.6 % of the capital and 67.2 % of the votes.

Significant events after the end of the period

On April 8, SCA Mezs Latvija, a wholly owned subsidiary of Svenska Cellulosa Aktiebolaget SCA, took up and paid the shares in SIA Latvijas Mezu Kompanija and Baltic Forest IV SIA.

In view of an intermediary with the Chairman of the Board relating to compensation for increase in value in connection with the sale of all shares in the operating subsidiaries, Ted Alvenius has left his post as board member and chairman of Latvian Forest Company AB and made it available with immediate effect on May 20, 2019.

The Board of Directors has decided to propose to the Annual General Meeting to decide on dividends to shareholders, who will be paid with EUR 0.54 per share. The dividend will be paid in Swedish kronor and currently corresponds to approximately SEK 5.81 per share. The record date for obtaining a dividend should be Monday July 1, 2019. The last day for trading the company’s shares including the right to dividend is Thursday, June 27, 2019. The proposed dividend totals EUR 11,075,973. The Board of Directors also proposes that the remaining free equity be balanced into new accounts.

Next report

The interim report for the period January to June 2019 is scheduled to be published on August 23, 2019.

Annual Report and Annual General Meeting

Notice of the Annual General Meeting on June 27, 2019 has taken place and the Annual Report and associated material will be available no later than two weeks before the Annual General Meeting.

Accounting principles

This interim report has been prepared for the Group in accordance with IFRS (International Financial Reporting Standards) such as those adopted by the EU, RFR 1 Supplemented accounting rules for groups and the Annual Accounts Act. The parent company’s accounts are prepared in accordance with RFR 2 Accounting for Legal Persons and the Annual Accounts Act.

As of January 1, 2018, the company applies IFRS 15 Revenue from contracts with customers, with full retro activity. This means that the revenue is reported when the customer receives control over the sold-out goods or service and can use and obtain the benefits from the goods or services. The effect on the company is none or virtually none. See note 1 below. See also the Annual Report for 2017.

For the most part, the company sells felling rights. These are then prepared by the company so that a buyer can immediately initiate logging. It may therefore be said that almost everything the company sells falls to the customer while payment is paid. This means that the customer receives the full benefit of the item or service upon payment.

Regarding this report

This report has not been subject to special examination by the Company’s auditor

For further information please contact

Aleksandrs Tralmaks, VD

+37129203972

[email protected]

Visit our website: www.latvianforest.se