News

24
05.2018

Interim Report January - March 2018

2018-05-24

  • Book value on land and forest assets of 21.924,3 (20.829,8) TEUR
  • Owners’ Equity per share was 1,034 (1,06) EUR
  • Earnings per share 0,008 (0,0039) EUR
  • Property holdings of 9.665 (9.368) hectare
  • Timber volume was 1.035.000 (929.525) cubic meter
  • Sales of 49,6 (10,5) TEUR
  • Operating profit shows -111,2 (-85,7) TEUR
  • Increase in forest value of 333,0 (179,2) TEUR
  • Net profit was 155,2 (62,0) TEUR

 

(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 totaled 9.665 (9.368) hectares. Of these, 7.181 (6.860) were forests and 2.484 (2.508) other land including 1.828 (1.814) agriculture land. The total growing stock was estimated to be approximately 1.035.000 (929.525) cubic meters after completed felling.  

During the first quarter, a total of 0,3 MEUR was invested in 5 single properties and 145 hectares with a growing stock of approximately 15.000 cubic meter whereof approximately 9.000 consists of felling woods.

The average growing stock was 140 cubic meter per hectare forest land. The company management still holds the opinion that the terms are favourable for acquisition of single properties, since some foreign property owners consider it favourable to leave the Latvian market.  

Turnover and result

Revenue amounted to 49,6 (10,5) TEUR and mainly relates to revenue from the sale of felling, that is standing forest timber. Felling rate has increased significantly during the first quarter due to favourable market for timber.

Company management has decided to replace the previous forest manager SIA “VDI Energy” with SIA Future Forest. The purpose of the change is to improve the day to day work with forest management. SIA Future Forest has been given a mission to implement actions leading to a more methodical way of work with the necessary forestry for each single property. In this way, both management and shareholders will receive systematized information about the possessions. Furthermore, a more efficient report- and planning system shall be based on improved information about the possession.

SIA Future Forest shall also improve the productivity of agriculture land and implement a strategy where agriculture land is leased to local farmers (i), is converted to forest land (ii), or is sold (iii).  

The change of forest manager has led to an increase in cost of 41,9 TEUR, including personnel cost, during the first quarter. This is a non-incurring cost and will not affect the long-term cost base of the company. The fee for the new forest manager is more result driven and is supposed to improve efficiency.    

Otherwise, the results of operations are 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.

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 1.035.000 cubic meter.

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 does 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

During the first quarter felling of only 1.248 cubic meter has been made, only part of planned felling volumes, standing forest timber for sale. This is a result of the change of forest manager. The average felling income was 33,65 EUR per cubic meter.

The company has planned for a felling volume of 40.000 cubic meters during 2018. At the time of this report the company has managed to sell a further 6.121 cubic meters of felling rights at an average price of 40 EUR per cubic meter. The necessary documentation has been prepared and application has been made for a felling permit of further 35.000 cubic meters, which has been mandated by The National Board of Forestry. 

A total of 189 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

Interest for wood products is an all-time high. The price is high for timber as well as for wood pulp. The price is at an historic record high in Sweden for wood pulp at 1.130 US dollar per ton. Another positive tendency that has been reported by ATL.se, is that total investment by the forest industry in Sweden amounted to 72,3 billion Swedish kronor at current prices during 2017, reaching its highest level in 80 years according to SCB.

This shows the high confidence ahead for the forest industry. Further, according to the same source, investments in saw milling and paper industry are expected to increase during 2018. The positive sentiment is reflected also for the forest industry in Latvia.

During 2017 The Latvian National Board of Forestry have issued felling permits for 14,23 million cubic meters, an increase of 2,11 million cubic meters compared to 2016. This remarkable increase was mainly due to private forest owners more actively searching for felling permits. Roughly 8,22 million cubic meters where planned for felling by the private forest owners. The Latvian state forests maintained the same felling volume of about 6 million cubic meters from 2016 also in 2017. The historical tendency is, of course, that not all volume will be felled, but it is an important sign of optimism among forest owners.

This is also reflected in the increased export of Latvian wood products by 9,4% in January 2018 compared to January 2017. It reached 190 million EUR compared to 175 million during January 2017. The largest export markets are Great Britain, Denmark and Sweden. Export during January 2018 was distributed to Great Britain 15,5 % (30 million EUR), 10,4 % (20 million EUR) to Denmark and 9,7 % (19,75 million EUR) to Sweden.

Latvia is one of Europe’s major producer 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.

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.

The management of Latvian Forest Company still have no indication of higher property prices due to a stronger timber market. Quite opposite, the smaller local forest owners tend to sell their property after felling to avoid investments in different forest actions. Here is an opportunity to acquire such property at a favourable price. Also, some foreign investors in forestry tend to sell their possession due to generational renewal. 

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 other. 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.

Financing

No new share issues have been made and no loans have been raised during the first quarter.

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 2.297.241 EUR divided into 80.000 A-shares and 20.511.061 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 67,6% of the share capital and 67,2% of the votes.

Events after the end of the period

The property holdings amount to 9,368 hectares at the time of this report.

Next report

Interim report for the period January - June 2018 is scheduled for publication on August 23, 2018.

Annual report and annual general meeting

Notice for annual general meeting on June 12, 2018 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 auditor.

Stockholm, 2018-05-22

The Board

For further information please contact

Aleksandrs Tralmaks, VD

+37129203972

info@latvianforest.se

Visit our website: www.latvianforest.se

 

CONSOLIDATED INCOME STATEMENT (TEUR)

 

Jan-Mar 2018

Jan-Mar 2017

Jan-Dec 2017

Jan-Dec 2016

Net sales

 

46.5

10.5

232.7

123.2

Other operating income

 

3.1

0.0

0.4

0.5

Total income

 

49.6

10.5

233.1

123.7

Materials and services

 

-41.8

-19.1

-70.2

-89.6

Other operating expenses

 

-103.5

-68.5

-286.4

-283.6

Personnel expenses

 

-15.4

-8.5

-35.4

-38.0

Depreciation and write-down

 

-0.1

-0.1

-0.3

-2.1

Other expenses

 

0.0

0.0

0.0

0.0

Operating profit

 

-111.2

-85.7

-159.2

-289.6

Capital gain property sales

 

-

-

-

38.5

Operating profit before change in value forest

 

-111.2

-85.7

-159.2

-251.1

Change in value forest

 

333.0

179.2

480.6

792.0

Operating profit

 

221.8

93.5

321.4

540.9

Financial income

 

0.1

1.7

4.9

15.8

Financial expenses

 

-66.7

-27.1

-127.3

-98.6

Net financial items

 

-66.6

-25.4

-122.4

-82.8

Profit before tax

 

155.2

68.1

199.0

458.1

Income tax

 

-

-

-

-

Deferred tax

 

-

-6.1

1284.4

-62.2

NET PROFIT/LOSS FOR THE PERIOD

 

155.2

62.0

1483.4

395.9

 

 

STOCK DATA

2018-03-31

2017-03-31

Average number of shares

20,511,061

15,856,792

Number of shares

20,511,061

15,856,792

Earnings per share after tax, Euro

0.008

0.004

Equity per share, Euro (before and after dilution

1.034

1.061

Cash flow from current operations per share, Euro

-0.015

-0.007

 

 

CONSOLIDATED BALANCE SHEET

(TEUR)

 

2018-03-31

2017-03-31

2017-12-31

ASSETS

 

 

   

Forest and other forest land

 

7,684.9

7,322.9

7,489.8

Biological assets, growing forests

 

14,232.4

13,347.2

13,834.1

Inventories

 

1.1

0.2

0.1

Deposits

 

5.9

5.9

5.9

Deferred tax claim

 

0.0

153.6

0.0

Total fixed assets

 

21,924.3

20,829.8

21,329.9

Accounts receivables

 

46.0

4.4

9.1

Current receivables

 

62.1

58.5

47.1

Cash and cash equivalents

 

1,085.3

97.4

1,651.5

Total current assets

 

1,193.4

160.3

1,707.7

TOTAL ASSETS

 

23,117.7

20,990.1

23,037.6

   

 

   

EQUITY AND LIABILITIES

 

 

   

Equity

 

21,210.5

16,824.9

21,057.8

Long term liabilities

 

1,758.8

1,758.8

1,758.8

Deferred tax liabilities

 

0.0

1,444.1

0.0

Interest-bearing liabilities

 

0.0

895.8

0.0

Accounts payables

 

74.6

12.3

164.9

Other payables

 

5.2

1.9

2.0

Accrued expenses and prepaid income

 

68.6

52.3

54.1

TOTAL LIABILITIES

 

1,907.2

4,165.2

1,979.8

TOTAL EQUITY AND LIABILITIES

 

23,117.7

20,990.1

23,037.6

Pledged collateral: General pledge of assets

 

1,764.7

2,660.5

1,764.7

Solidity

 

91.8%

80.2%

91.4%

Debt/equity ratio

 

0.09

0.25

0.09

 

CONSOLIDATED STATEMENT OF CASH FLOW (TEUR)

 

2018-03-31

2017-03-31

2017-12-31

Operating profit

 

221.8

93.5

321.4

Adjustments for non-cash items:

 

 

 

 

 -  Change in value forest

 

-333.0

-179.2

-480.6

 - Depreciation and write-down

 

0.1

0.1

0.3

 - Received interest

 

-

0.8

0.0

 - Paid interest

 

-11.3

-21.2

-86.7

- Translation difference of earnings in foreign currency

 

0.1

-

-7.6

Cash flow from operating activities before changes in working capital

 

-122.3

-106.0

-253.2

Cash flow from changes in working capital

 

-180.4

-10.9

127.2

Cash flow from current operations

 

-302.7

-116.9

-126.0

Investing activities

 

 

 

 

Forest and other forest land

 

-195.1

-

-166.9

Biological assets, growing forests

 

-65.3

-

-185.5

Inventories

 

-1.1

0.1

0.0

Cash Flow from Investing activities

 

-261.5

0.1

-352.4

Financing activities

 

 

 

 

New share issue

 

-

-

2850.2

Capital cost

 

-2.0

-6.6

-45.3

Change in loans

 

-

5.9

-889.9

Cash Flow from Financing activities

 

-2.0

-0.7

1,915.0

CASH FLOW FOR THE PERIOD

 

-566.2

-117.5

1,436.6

Net Cash at the beginning of period

 

1,651.5

214.9

214.9

Cash flow for the period as above

 

-566.2

-117.5

1,436.6

Net Cash at period end

 

1,085.3

97.4

1,651.5

 

 

STATEMENT OF CHANGES IN EQUITY (TEUR)

 

Share Capital

Other contributed capital

Retained profit incl. profit/loss for the period

Total Equity

Equity 31 December 2016/1 January 2017

 

1,776.0

9,483.3

5,509.8

16,769.0

Profit/loss for the period

 

-

-

1,483.4

1,483.4

Total revenue and expenses for the year

 

0.0

0.0

1,483.4

1,483.4

New share issue

 

521.3

2,328.9

 

2,850.2

Capital cost

 

0.0

-45.3

0.0

-45.3

Equity 31 December 2017/1 January 2018

 

2,297.3

11,766.8

6,993.2

21,057.3

 

 

 

 

 

 

Profit/loss for the period

 

 

 

155.2

155.2

Capital cost

 

 

-2.0

 

-2.0

Equity 31 March 2018

 

2,297.3

11,764.8

7,148.4

21,210.5

 

 

PARENT COMPANY INCOME STATEMENT (TEUR)

 

Jan-Mar    2018

Jan-Mar 2017

Jan-Dec   2017

Net sales

 

15.6

15.0

62.8

Cost of goods sold

 

0.0

0.0

0.0

Other external expenses

 

-25.5

-28.9

-114.3

Personnel expenses

 

0.0

0.0

0.0

Operating profit

 

-9.9

-13.9

-51.5

Profit from financing activities

   

 

 

Financial income

 

64.6

56.5

233.9

Financial expenses

 

-54.0

-14.8

-78.1

Net financial items

 

10.6

41.7

155.8

Net profit/loss for the period

 

0.7

27.8

104.3

 

PARENT COMPANY BALANCE SHEET

(TEUR)

 

2018-03-31

2017-03-31

2017-12-31

ASSETS

 

 

 

 

Shares in subsidiaries

 

6,073.9

6,073.9

6,073.9

Group receivables

 

6,797.6

5,719.2

6,097.6

Deposits

 

5.9

5.9

5.9

Deferred tax claim

 

-

-

-

Total fixed assets

 

12,877.4

11,799.0

12,177.4

Short term receivables

 

26.7

25.7

64.8

Cash and cash equivalents

 

991.0

87.1

1,635.6

Total current assets

 

1,017.7

112.8

1,700.4

TOTAL ASSETS

 

13,895.1

11,911.8

13,877.8

   

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

Equity

 

13,852.5

10,966.3

13,854.3

Interest bearing liabilities

 

-

895.8

-

 

Other payables

 

25.8

12.7

6.3

Accrued expenses

 

16.8

37.0

17.2

TOTAL LIABILITIES

 

42.6

945.5

23.5

TOTAL EQUITY AND LIABILITIES

 

13,895.1

11,911.8

13,877.8

Solidity

 

99.7%

92.1%

99,8%

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