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Corporate Presentation
June 2014
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Disclaimer
These materials may not be copied, published, distributed, transmitted or disclosed to third parties. In addition, these materials may not be distributed in certain countries, including the United States, Canada, or Japan. These materials contain forward-looking statements based on the currently held beliefs and assumptions of the management of RusForest that are expressed in good faith and, in their opinion, reasonable. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, financial condition, performance, or achievements of RusForest or industry results, to differ materially from the results, financial condition, performance or achievements expressed or implied by such forward-looking statements. Given these risks, uncertainties and other factors, recipients of this document are cautioned not to place undue reliance on these forward-looking statements. RusForest disclaims any obligation to update these forward-looking statements to reflect future events or developments. Where information in this presentation has been sourced from a third party, RusForest confirms that the information has been accurately reproduced and so far as RusForest is able to ascertain from information published by that third party, and so far as RusForest is aware, no facts have been omitted which would render the reproduced information inaccurate or misleading.
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Company Overview
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Summary
Swedish forestry company focused on Russia.
Vertically integrated from timber leases to sawmilling and wood pellet production.
High-quality, slow-growth forests.
Close proximity to main markets in Europe, Japan, and China.
Extensive Russian forestry experience from new management and major shareholder.
RusForest Overview
Corporate Information
Stock Exchange Listing NASDAQ OMX Stockholm First North ticker “RUSF”
Shares Outstanding 132.0 million
Share Price* SEK 1.80
Market Capitalization USD 36.6 million
Net Debt** USD 19.5 million
Enterprise Value USD 56.1 million
Main Shareholder Nova Capital (25.4%)
*Share price at closing on June 17, 2014. ** Net Debt on March 31, 2014. Log yard at the Magistralny sawmill
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Forestry Value Chain
Timber
2.5 million ha
leased
Harvesting Sawmilling
2.6 million m3
AAC
210,000 m3
annual capacity
Pellet production
100,000 t
annual capacity
ha = hectares; AAC = Annual Allowable Cut; m3 = cubic meters; t = tons.
Significant asset base.
Forest Stewardship Council (FSC) certification across the full value chain.
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Asset Locations
Arrows indicate sawnwood transportation routes by rail and ship
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Significant Events
Financial restructuring
New management
Divestment of non-core
assets
New Markets
Corporate simplification
Arkhangelsk pellet mill
Divestment of
Boguchany
New strategic
shareholder
• Debt-equity
swap and
new share
issue.
• Nova Capital
(25.4%
ownership).
• Russian
investor with
extensive
experience in
Russian
forestry.
• Significant
changes to
senior
management,
including new
CEO, COO,
CFO and local
CEOs.
• Non-core
asset sales of
USD 7 million
in 2013.
• On-going
Forest lease
(AAC)
optimization.
• Realized first
important sales
to the premium
Japanese
market, which
has grown
to 21% of sales
in Q4 2013.
• Initiated a
simplification of
legal structure.
• Significant
reduction of
corporate costs.
• Improving
Company’s
corporate
governance,
internal controls
and tax
efficiency.
• Completed
construction
of 100,000
tons/year
pellet mill in
Arkhangelsk.
• Boguchany
business
segment divested
for gross USD
13.8 million,
net USD 4 million
in cash to
RusForest plus
significant loss
reduction.
2013 2014
RusForest is on track to reach positive results.
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New RusForest Shareholder – Nova Capital
Selected Investments
Forestry
‒ OOO Lesresurs.
‒ RusForest AB (25.4%).
Agriculture
‒ OOO Berezovka.
Real Estate
‒ Regional residential/commercial real estate.
‒ Total area of c. 32,000 m2.
Alexander Rudik, Owner and President, former Vice Governor of constituent entity of the Russian Federation and former member of the Forestry Board of the Russian Federation Ministry of Natural Resources.
Anton Bogdanov, former Неаd of Industrial Asset Management and CEO the management company for Lesresurs, 10+ years of managerial experience, previously served as CEO of Russian Timber Group.
Key Personnel
Sector – Forestry. Location – Irkutsk Region, Eastern Siberia, Russia. Area under lease – 140,600 ha. AAC – 372,000 m3. Sawmilling capacity – 170,000 m3 p.a. Key 2013 financials:
—Sales $83 million. —EBITDA $15 million.
Highlights:
—Strong sales growth combined with robust EBITDA (18% margin) and positive bottom-line.
—Debt/EBITDA – less than 1x. —One of the largest Russian exporters of sawn
products to Japan.
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Competition
RusForest ranks about 6th among Russian forestry companies in terms of annual allowable cut (AAC).
RusForest ranks in TOP-20 among Russian sawmilling companies in terms of capacity.
RusForest ranks 3rd among Russian pellet producers in terms of capacity.
# Company mln m3
1 Ilim Group 8,0
2 Mondi 5,0
3 RFP Group 4,5
4 Investlesprom 4,5
5 Altailes 2,8
6 RusForest 2,6
7 Russian Timber Group 2,3
8 Terneyles 1,9
9 Vologodskie Lesopromyshlenniki
1,9
10 Titan 1,7
# Company 1,000 m3
1 Investlesprom 760
2 Russian Timber Group 700
3 Lesosibirsky LDK №1 550
4 Novoeniseisky LHK 470
5 Ilim Timber 460
6 Titan Group 450
7 Stora Enso 400
8 Mayr-Melnhof Holz 350
9 Arkaim 350
10 LIK (former UPM) 320
…
17 RusForest 210
# Company 1,000 t
1 Vyborgskaja Lesnaja Kompanija
1,000
2 SP Arkaim 250
3 RusForest 100
4 Novoenisejskij LHK 80
5 DOK-Enisej 80
6 Lesozavod-25 75
7 Swedwood Tikhvin 75
8 Setnovo 70
9 Talion Terra 60
10 Severo-Zapadnyj Holding 60
AAC (estimated) Sawnwood capacity Wooden Pellet capacity
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Market Overview
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Housing Starts
Sources: Euroconstruct (Europe - 19 countries); U.S. Census Bureau; Ministry of Land, Infrastructure, Transport and Tourism of Japan
USA
Europe
Japan
China
The construction sector is the key driver for the sawmilling business. The forecast is generally positive.
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Sources: FAOSTAT, Wood Markets International, Japan Lumber Journal, ISC2013.
Softwood Sawnwood Consumption
USA
Europe
Japan
China
The US market is the largest single market for softwood sawnwood, a globally traded commodity. Any
major change in the US market will affect global business dynamics. The forecast is positive in all key
markets.
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Sawnwood Markets - Japan
Russian sawnwood suppliers to Japan in 2013
Japan is the 3rd (in terms of value) and the 6th (in terms of volume) among key Russian sawnwood export
markets.
RusForest is the 6th largest Russian sawnwood exporter to Japan (in terms of volume) with the share of 3.4%.
Source: Russian Custom
Russian sawnwood suppliers to Japan in 2013
Source: Russian Custom
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Sawnwood Prices
USA
Europe
Japan
China
Sources: Wood Markets International, Random Lengths
Currently, the prices of sawnwood are strong relative to the past seven years. Prices have recovered in
all key markets.
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Global Pellet Demand Outlook
According to Pöyry Management Consulting, demand is projected to grow strongly in Europe, Japan
and South Korea and the market is expected to more than double by 2025. Demand for industrial
pellets is the main driver for this development.
Source: Pöyry Management Consulting
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Pellet Prices
May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14
165
170
175
180
185
160
USD/t
Source: Argus Media, 2014
Argus CIF ARA wood pellet prices, USD/t
Pellet prices tend to go up during winter months when demand is highest while prices are lower in the
summer due to weaker demand from the heating market.
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Year-Round Deliveries from Russia to Export Markets
Loading of the Company’s first shipment of pellets from Arkhangelsk in April 2014.
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Conclusion
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RusForest Summary
Unique platform:
Swedish forestry company focused on Russia
Vertically integrated from timber leases to sawmilling and wood pellet production
High-quality, slow-growth forests
Close proximity to main markets in Europe, Japan, and China
Extensive Russian forestry experience from new management and major shareholder
Next step – Positive cash flow:
Developing wood pellet sales from Arkhangelsk
Finalizing Boguchany transaction to collect remaining asset sale proceeds
Continuing forest lease optimization
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Appendix
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Full year
USDm 2014 2013 2013
Revenue 17.9 18.1 66.2
EBITDA adjusted 1.4 (2.3) (8.0)
Profit/(loss) from continuing operations (3.3) 34.9 6.9
Profit/(loss) from discontinued operations 0.1 (6.0) (51.4)
Profit/(loss) for the period (3.2) 28.9 (44.5)
Net income/(loss) per share (USD per share) (0.02) 0.63 (0.41)
Cash balance 3.5 3.6
Working capital 7.2 10.1
Net debt 19.5 22.5
31 Mar 2014
First quarter
31 Dec 2013
First Quarter 2014 Financial Highlights
First ever Group positive
EBITDA of USD 1.4 million adjusted for non-recurring items in Q1 2014.
Net loss of USD 3.2 million, compared to loss of USD 12.5 million in Q1 2013 (adjusted for USD 41.4 million gain on bond restructuring in Q1 2013).
Net debt decreased compared to 31 December 2013.
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First Quarter 2014 Income Statement
Q1 2014 revenue similar to Q1 2013 --More sawnwood sold at higher prices --Much less sawlogs sold but at higher prices
Cost of sales decreased 18% and administrative expenses decreased 28% in Q1 2014 compared to Q1 2013 due to operational improvement measures and the weakening Russian ruble.
Distribution expenses increased due to
more sales executed on terms including delivery to customers. Increased distribution expenses more than offset by higher price and thereby additional margin captured by RusForest.
In thousands of USD Q1 2014 Q1 2013 12M 2013
Continuing operations
Revenue 17,920 18,149 66,210
Cost of sales (13,884) (17,048) (63,957)
Gross profit/(loss) 4,036 1,101 2,253
Other income 704 570 1,996
Distribution expenses (2,900) (2,668) (11,297)
Administrative expenditure (2,930) (4,093) (14,207)
Other expenses (369) 232 (897)
Impairment loss - - (7,630)
Operating profit/(loss) (1,459) (4,858) (29,782)
Financing income 9 365 96
Gain from bond restructuring - 41,404 41,404
Financing cost (1,863) (1,942) (4,939)
Net financing income/(cost) (1,854) 39,827 36,561
Profit/(loss) before tax from continuing operations (3,313) 34,969 6,779
Income tax (36) (117) 110
Profit/(loss) from continuing operations (3,349) 34,852 6,889
Discontinued operations
Profit/(loss) after tax from
discontinued operations 112 (5,981) (51,406)
Profit/(loss) for the period (3,237) 28,871 (44,517)
Attributable to:
Equity holders of the parent (3,203) 28,887 (45,270)
Non-controlling interests (34) (16) 753
Profit/(loss) for the period (3,237) 28,871 (44,517)
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In thousands of USD 31 Mar 2014 31 Dec 2013
Assets
Non-current assets
Property, plant and equipment 61,869 68,441
Forest lease rights 13,024 14,406
Other assets 330 338
Total non-current assets 75,223 83,185
Current assets
Inventory 9,871 10,368
Loans receivable from related companies 3,924 -
Cash and cash equivalents 3,533 3,637
Assets classified as held for sale 8,549 19,562
Other assets and receivables 11,282 11,967
Total current assets 37,159 45,534
Total assets 112,382 128,719
EQUITY
Total equity attributable to Shareholders of the Group 66,220 76,072
Non-controlling interest 361 430
Total Equity 66,581 76,502
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 16,100 17,884
Deferred tax liability 13 4
Total non-current liabilities 16,113 17,888
Current liabilities
Interest bearing loans and borrowings 10,842 8,053
Other payables and liabilities 13,963 12,241
Liabilities directly associated with the assets classified as held for sale 4,883 14,035
Total current liabilities 29,688 34,329
Total liabilities 45,801 52,217
Total equity and liabilities 112,382 128,719
First Quarter 2014 Balance Sheet
Cash reserves stable compared to balance at 31 December 2013.
Loans receivable from related
companies refers to receivable from Boguchany business segment that will be paid by buyer to RusForest as part of transaction completion. The transaction is expected to close on or around 30 September 2014.
Assets held for sale include Ystad Pellets AB and Boguchany harvesting unit.
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RusForest AB (publ)
Matti Lehtipuu, Group CEO
Gustav Wetterling, Group CFO
Hovslagargatan 5
111 48 Stockholm
Sweden
Phone: +46 8 771 85 00
Email: [email protected]
Website: www.rusforest.com
Contact
