RusForest AB (publ) March Company presentation

Transcription

1 RusForest AB (publ) March Company presentation 1

2 Disclaimer This presentation, which is confidential and personal to the recipient, has been prepared and issued by RusForest AB (publ) ( RusForest or the Company ). It may not be reproduced, redistributed, passed on or published, in whole or in part, to any other person for any purpose. Unless otherwise stated, the Company is the source for all data contained in this presentation. Such data is provided as at the date of this presentation and is subject to change without notice. This presentation does not constitute or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. Neither this presentation nor any copy of it may be taken, transmitted into or distributed in Australia, Canada, Hong Kong, Japan, New Zeeland, Russia, Singapore, South Africa, Switzerland or the United States of America or other countries where distribution of the presentation would require additional measures other than those pursuant to Swedish law. The distribution of this presentation in other jurisdictions may also be restricted by law and persons into whose possession this presentation comes should inform themselves about and observe any such restrictions. The shares of the Company have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the Securities Act"), and may not be offered or sold in the United States (as such term is defined in Regulation S under the Securities Act) except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the securities act or unless registered under the Securities Act. There will be no offering of the securities in the United States. The information in this presentation has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information or opinions contained herein. None of RusForest or Pareto Öhman AB (the Managers ) or any their respective subsidiary undertakings or affiliates or any of such person s directors, officers or employees, advisers or other representatives, accepts any liability whatsoever (whether in negligence or otherwise) arising, directly or indirectly, from the use of this presentation or otherwise arising in connection therewith. By attending this presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company s business. The Managers are acting for RusForest in connection with the rights issue and no one else and will not be responsible to anyone other than the Company for providing the protections afforded to the respective clients of the Managers or for providing advice in relation to the rights offer or any transaction or arrangement referred to in this presentation. This presentation includes forward-looking statements. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, achievements or industry results to be materially different from those expressed or implied by these forward-looking statements. Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release any update of, or revisions to, any forwardlooking statements in this presentation as a result of any change in our expectations or any change in events, conditions or circumstances on which these forward-looking statements are based. 2

3 Company summary Swedish forestry company focused on Russia Vertically integrated from timber leases to sawmilling High-quality, Siberian slow-growth forests Self-sufficient in raw materials for sawmills Close proximity to main markets in Europe, China and Japan Management and Board with extensive forestry expertise Asset Locations Corporate Information Stock Exchange Listing Shares Outstanding 1 Implied Market Capitalization 2 NASDAQ OMX Stockholm First North ticker RUSF 13.2 billion (132 million post-split) $61.9 million 1. Shares outstanding following the Set-Off Issue, Rights Issue and Directed Issue but prior to 100:1 reverse split in April Based on issue price of SEK 0.03 per share, shares outstanding as per footnote 1 and the exchange rate SEK/USD of 6.4. Timber 3 million hectares leased Forestry Value Chain Harvesting Sawmilling Pulp & Paper 3.6 million m 3 AAC 415,000 m 3 annual capacity AAC = Annual Allowable Cut; m 3 = cubic meters. 3

4 Content 1 Market Overview 2 Company Overview 4

5 Russia has the largest forest reserves Russia Brazil Canada USA China Source: FAO. 0% 5% 10% 15% 20% 25% Percentage of Global Total 5

6 Russia has a relatively small share of lumber production USA Canada Russia Germany Sweden China India Finland Austria Japan Rest of World Source: FAOSTAT. 0% 5% 10% 15% 20% 25% 30% Percentage of Global Total 6

7 Largest net-exporters of lumber Sweden, Russia and Canada (million m³/year) Russia was the second largest net-exporter of lumber in 2011 Sweden, Russia and Canada dictate global lumber trade Source: Pöyry Management Consulting, FAO. 7

8 Largest net-importers of lumber China, USA and Japan (million m³/year) Demand from China, USA and Japan drives global lumber trade Source: Pöyry Management Consulting, FAO. 8

9 US is largest lumber consumer housing recovery beginning demand, billion board feet 12-month moving total U.S. Lumber Demand (left scale) housing starts, millions Historical Average U.S. Housing Starts (right scale) Nov'12 Dec' Source: U.S. Census Bureau; WWPA Year 0.2 9

10 Lumber prices are rising Source: BC Ministry of Forests and Range; Random Lengths; WSJ. monthly US$/m 3 US$/m 3 S-P-F Lumber (2x4s) (left scale) S-P-F Sawlog (right scale) Year Logs: Delivered Lumber: Mill net Jan'13 Dec'

11 Canadian lumber production will decline from beetle epidemic million m 3 12-month moving total Nov' million m 3 Forecast (based on anticipated log supply) Source: Stats Can; ERA. Year 11

12 British Columbia lumber exports by destination 35 million m 3 million m to Rest of World to Japan to China to U.S Source: Stats Can Year 0 12

13 Chinese demand for lumber is robust who replaces imports from Canada? 8 Chinese Lumber Imports by Country '000,000 m 3 12-month moving total Canada Russia Dec USA Source: China Bulletin Report - Wood Markets International. 0 13

14 Growing Chinese wood demand will be supplied by Russia Growing demand will be satisfied by imports from regions with surplus biomass Russia and plantation regions offer largest potential Increasing harvest potential Stable harvest potential Stable harvest potential but in high demand Raw material deficit Source: Pöyry Management Consulting. 14

15 Content 1 Market Overview 2 Company Overview 15

16 New management team CEO Garrett Soden Appointed CEO in August 2012 Has worked with public companies associated with the Lundin family since 2007 and has extensive experience in emerging markets Previously CFO of Etrion Corporation, a renewable energy company listed on Toronto Stock Exchange and NASDAQ OMX Stockholm CFO Kirill Pronin Appointed CFO in August 2012 after serving as interim CFO from March 2012 Intimately familiar with the company, having been employed as Project Director in Taiga Asset Management and later in RusForest Management in Moscow since 2008 Prior to that, worked in Transaction Advisory at PricewaterhouseCoopers' Moscow office COO Peter Nilsson Appointed COO and Director of Sales and Production in October years of forestry experience, most recently as CEO of the Swedish sawmilling company Södra Timber Previously, CEO of Geijer & Söner and held various positions at SCA Timber, including CEO of the UK operations Has also served on several boards in the sawnwood distribution and homebuilding industries Nova Capital Board Members Alexander Rudik; Owner and President of Nova Capital. Before founding Nova Capital, established Region Group of Companies, a leading Russian investment group, in 1995 and remained principal shareholder and president until Former member of the Forestry Board of the Russian Federation Ministry of Natural Resources Paul Putz; Partner of Paul Putz & Partner Management Consultants, an Austrian advisory firm focused on supporting CEE and Russian companies extending business into the European Union. 20 years of experience in investment banking. Former CEO of Ecolive SA, a holding company managing Russian forestry assets 16

17 Overview of Nova Capital Description Russian investment company established in 2011 Focused on the Russian market and in particular forestry, agriculture and real estate Publishes analytical reports on the Russian forestry sector Selected Investments Forestry OOO Lesresurs Agriculture OOO Berezovka Real Estate Novosibirsk, 36,000 m 2 of residential real estate Odintsovo, residential real estate Gelendzhik, 6,700 m 2 of cottage settlements OOO Lesresurs Lesresurs operates the full cycle of wood processing from timber harvesting to finished products Annual Allowable Cut ( AAC ) of 372,000 m 3 Annual logging capacity of 350,000 m 3 Annual sawmilling capacity of 170,000 m 3 FSC certified Exports to Japan account for 80% of revenue and 55% of volumes shipped Sales Jan-Sep 2012 of RUR 1,544m (USD 50m) and EBITDA of RUR 411m (USD 13m), EBITDA margin of 27% Nova Capital has extensive experience operating a profitable forestry company Note: Assumes RUR/USD exchange rate of Key Personnel 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, Неаd of Industrial Asset Management and CEO of Nova Management Group (management company for Lesresurs), has 10 years of managerial experience and previously served as CEO of Russian Timber Group Temo Jorbenadze, Head of Investments, has 12 years of investment banking experience Anton Malyavkin, Finance, has over 10 years experience in financial management and corporate finance 17

18 RusForest in perspective - Selected publicly traded peers By Hectares By AAC Company Source: Company information and Timberland Note: Comparison based on hectares controlled (owned or leased). Hectares in millions RusForest 3.0 Plum Creek 2.7 SCA 2.6 Weyerhaeuser 2.6 Hancock 2.2 BillerudKorsnäs 2.0 Forestland Group 1.5 TCG 1.3 Holmen 1.3 Rayonier 1.1 RMS 1.1 FIA 0.9 Sierra Pacific 0.8 GMO 0.8 Potlatch 0.7 Molpus 0.6 Company AAC (m 3 in millions) Canadian Forest 10.8 Western Forest 6.2 West Fraser Mills 6.0 Tolko Industries 4.0 International Forest 3.8 RusForest 3.6 Louisiana Pacific Canada 1.1 Conifex MacKenzie Forest 0.9 Taan Forest 0.8 MacKenzie Fibre Mgmt 0.8 Teal Cedar 0.8 Timberwest Forest 0.7 Weyerhaeuser 0.7 Large asset base Source: Company information and Ministry of Forests and Range. 18

19 Different regions with different customers transport by rail, truck and sea 19

20 Revenue sources and recovery rates $40 50/m 3 $ /m 3 Harvesting 65% Sawlogs Sawmilling 45% Lumber 35% Pulplogs Sale Waste 55% Residuals (bark/woodchips/sawdust) Sale Own Use as Fuel Waste RusForest s major revenue sources are sawlogs and lumber 1 cubic meter of lumber requires approximately 2 cubic meters of sawlogs Relatively stable, low cost of sawlogs due to own timber leases and harvesting operation Lumber price realizations increasing from recent FSC certification and drying chambers Leverage to EBITDA from potential lumber commodity price increase Note: Prices per cubic meter shown at mill gate. 20

21 Average lumber costs RusForest Aug 2012 RusForest Potential Wood Markets Benchmarking (USD/m 3 ) Arkhangelsk Boguchany Arkhangelsk Siberia Austria Sweden Finland Log Cost $55 $35 $55 $35 $110 $103 $106 Recovery 48% 44% 48% 44% 46% 47% 47% Log to Lumber Less Residual Sales (20) (15) (5) (46) (53) (54) Net Wood Cost $95 $80 $100 $75 $194 $167 $172 Sawmill Cost: Labor $35 $26 $35 $35 $30 $30 $26 Other Direct Cost Overhead and Admin Total Sawmill Cost $84 $88 $70 $80 $67 $75 $63 Total Cash Cost Mill Gate $179 $168 $170 $155 $261 $242 $235 Prices at Mill Gate $185 $176 $ $ $264 $243 $239 EBITDA/m 3 $6 $8 $10 40 $25 55 $4 $1 $4 Notes: RusForest cost potential shown for illustrative purposes only; does not reflect actual results. The RusForest figures are before corporate overhead. Average mill gate price for Austria, Sweden and Finland based on IWMG 2010 Cost Benchmarking Report for "Average" mills in each country. Average mill gate price for Boguchany based actual Aug/12 average sales price loaded on a rail carrier. Average mill gate price for Arkhangelsk based on actual Aug/12 sales price loaded on a vessel. Source: Wood Markets International, 2010 Global Cost Benchmarking Report (average mills). Competitive lumber cost position vis-à-vis European competitors Siberian operations have premium prices and sell to other markets than Europe 21

22 Non-core assets RusForest will focus all resources on its core units in Eastern Siberia Ust-Ilimsk and Arkhangelsk are under review All other assets will be divested or shutdown Such assets include: Gravel Shenkursk - Sawmill Other - Pellets machinery - Planing mills Book value: SEK 21m (USD 3m) Book value: SEK 14m (USD 2m) Book value: SEK 49m (USD 7m) Combined 9 months 2012 EBITDA of non-core assets of USD -2.0m Note: Assumes SEK/USD exchange rate of 7.0. Estimated book values after impairment in Q

23 Assets under review Arkhangelsk/LDK-3 New harvesting CEO Harvesting concentrated on most efficient lease areas Sawmilling operations subject to improvement program Sawmill started shipping woodchips to local pulpmills Potential for increases in harvesting and production without further investments in capacity Ust-Ilimsk New CEO Harvesting operations are being outsourced in order to reduce costs Some of the harvesting equipment is being relocated to Boguchany and Magistralny Sawmill leased to a third party Existing Capacity Existing Capacity AAC Harvesting Sawmilling 981,400 m 3 210,000 m 3 120,000 m 3 AAC Harvesting Sawmilling 942,560 m 3 180,000 m 3 66,000 m 3 23

24 Core assets Boguchany During Q3 2012, the company fully developed additional harvesting equipment purchased earlier in 2011 and 2012 New drying chambers and a boiler were launched in August 2012, and a new log sorting line was launched in September 2012 Construction and start-up of the dry sorting line for sawnwood completed in Q Potential for increases in harvesting and production without further investments in capacity Export market for sawlogs to China Magistralny De-bottlenecking of production Modernization of sawline in June/July 2012 Stable supply of sawlogs during the summer period Restart of shipments of woodchips and pulplogs to nearby pulpmills in September 2012 Potential for increases in harvesting and production without further investments in capacity Export market for sawlogs to China Existing Capacity Existing Capacity AAC Harvesting Sawmilling 748,400 m 3 315,000 m 3 120,000 m 3 AAC Harvesting Sawmilling 958,700 m 3 305,000 m 3 90,000 m 3 24

25 Actions to increase sawnwood prices Drying New drying chambers in Boguchany Dried wood expected to increase as a share of production FSC Forest Stewardship Council ( FSC ) certification for forests and sawmills expected to increase reach to high value markets Product Mix Increase in larch as share of harvesting and sawnwood production results in higher average prices and less competition from Scandinavia Increase exports of red pine lumber to Japan Log Supply More even log supply as a result of road construction expected to increase log quality, which results in better grading and higher average prices Sales Optimization of logistics (shipments in containers) WTO Receiving quotas for log exports to China and Europe under new WTO rules allows for export of logs not consumed in sawmills Foundations have been laid in 2012 to increase price realizations 25

26 Actions to reduce costs Increased Capacity Utilization Strengthen local management Sell or sublease non-core forest leases Sell inefficient harvesting equipment Use of subcontractors Focus road construction on most promising areas Increase load volume per wagon Review all sawmills for efficiency improvements Divestments Divest non-core assets to eliminate cash burn Improved Corporate Structure Reduce personnel Streamline corporate structure and management Lower administrative expenses Actions to reduce costs are underway 26

27 RusForest capital structure Balance Sheet 30 Sept 2012 Adjustments Adjusted Balance Sheet Q3 12 (SEKm) Property, Plant & Equipment 1,046.5 Forest Lease Rights Other Noncurrent Assets Cash 21.9 Inventory Other Current Assets Assets Held for Sale Total Assets 2,003.3 Equity 1,070.0 Bond + Interest Accrued Bridge Loan 1 Vostok Nafta 0.0 Bridge Loan 2 Vostok Nafta 0.0 Other Interest Bearing Loans Deferred Tax Liability 76.2 Trade and Other Payables Other Liabilities 21.9 Total Equity and Liabilities 2,003.3 Impairment 1 : SEK 500m Debt reduction: SEK m Debt swap: SEK 260.0m Rights issue: SEK 86.2m Directed issue: SEK 100.5m Bridge Loan 1 from Vostok Nafta: USD 5m (SEK 35m) 2 Bridge Loan 2 from Vostok Nafta: SEK 25m Notes: 1. Preliminary estimate with a split of SEK 320m in PP&E and SEK 180m in forest leases. Final impairment to be recorded in Q SEK/USD exchange rate of 7.0. Net debt zero company with sufficient cash resources (SEKm) Property, Plant & Equipment Forest Lease Rights Other Noncurrent Assets Cash Inventory Other Current Assets Assets Held for Sale Total Assets 1,750.0 Equity 1,280.5 Bond 3.7 Bridge Loan 1 Vostok Nafta 35.0 Bridge Loan 2 Vostok Nafta 25.0 Other Interest Bearing Loans Deferred Tax Liability 76.2 Trade and Other Payables Other Liabilities 21.9 Total Equity and Liabilities 1,

28 Overview of new ownership structure Commentary Graph shows ownership following the Set- Off Issue, Rights Issue and Directed Issue Set-Off Issue (Debt-to-Equity Swap) added 6,500,118,750 shares (outcome announced 20 Feb 2013) Rights Issue will add 2,874,230,820 shares (subscription period ends 13 Mar 2013) Directed Issue to Nova Capital will add 3,350,000,000 shares (approximately 26 Mar 2013) New total number of shares will be 13,203,388,040 before 100:1 reverse share split in April 2013 Vostok Nafta, 7% Ownership Other Current Shareholders, 18% Nova Capital, 25% Bondholders, 49% Note: Calculation assumes that Vostok Nafta only subscribes for its pro-rata share of Rights Issue. Nova Capital will be the major shareholder of RusForest following the transactions 28