Corporate Presentation. September 2016

Transcription

1 Corporate Presentation 1 September 2016

2 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. 2

3 3 Company Overview

4 Company Overview Summary Swedish forestry company operating in Russia Main assets located in Eastern Siberia in the business units 1.Magistralny and 2. Ust-Ilimsk Vertically integrated from forest management and harvesting to sawmilling and wood pellets High-quality, slow-growth forests in Irkutsk and Krasnoyarsk Region Close proximity to main growth markets in Asia Strong management team Experienced Board members Corporate Information Stock Exchange Listing Share Price * SEK 1.98 Shares Outstanding 130,655,471 Market Capitalization Net Debt Enterprise Value NASDAQ First North ticker RUSF USD 30.1 million USD million USD 17.7 million Main Shareholder Nova Capital (25.4%) *Share price at closing on 1 Sep 2016, Net debt at 30 Jun Asset Locations *Share price at closing on 26 November Net debt at 30 September Forestry value chain & annual capacities Timber (Forests) AAC: 1,063,860 m 3 Own harvesting: 450,000 m 3 Capacity: 90,000 m 3 AAC = Annual Allowable Cut; m 3 = cubic meters Harvesting Sawmilling Pellet Production Capacity: 30,000 t 4

5 RusForest Recent Development Turnaround Stability/Profitability Investment/Growth / New main shareholder and senior management Market reorientation to Japan Increase efficiency and profitability in core operations -Magistralny harvesting, sawmilling and sales -Ust-Ilimsk subcontracted harvesting & asset sales Magistralny pellet mill Own harvesting in Ust-Ilimsk Divestment of unprofitable noncore business units Admin cost reduction Forest lease optimisation (consolidation & concentration) Legal structure optimisation Forest lease optimisation (utilisation) Forest lease optimisation Share buyback program 5

6 Multiyear Overview Leased forest area and volume output reduced while profitability increased AAC Harvesting Sawmilling Revenue EBITDA Net Profit/Loss 6

7 RusForest s Competitive Advantages RusForest s competitive advantages Highly experienced management team Strong market position Low production costs Wood resources of highest quality 7

8 Wood Resources Russia s wood resources: Forest land area in Russia amounts to 882 million ha with total growing stock of 82 billion m 3, which makes up 20% of total world forest resources Mature and over-mature stands account for 44 billion m 3 or 54% of the total growing stock The major share of forests is concentrated in Siberia and Far East of Russia 78% of stocked area and 73% of the growing stock Severe weather conditions for tree growth in Siberia (short summers and cold winters) results in a special strength and durability of wood that is particularly RusForest s wood resources: RusForest s long-term forest leases in Irkutsk and Krasnoyarsk Regions 0.7 million ha Annual Allowable Cut (AAC) 1.1 million m 3 Within the leased areas there is a high concentration of mature softwood, predominately pine and larch Magistralny forest lease areas are FSC certified Low stumpage price in comparison with other companies Russia has the world s largest forest resources and is the world s second-largest exporter of softwood sawnwood after Canada valued by consumers in Japan and other high end markets. Siberian wood generally counts twice the amount of growth rings than equal dimensions from other countries. The density of Siberian wood is higher than other European species 8

9 Markets (1 of 2) Japanese sawnwood market Japan is the fourth largest softwood sawnwood market in the world (after USA, China and UK) World s largest softwood sawnwood importers in Japanese sawnwood market is very stable Japanese market is characterized by high quality and prices The proportional share of Russian sawnwood on the Japanese market increased from 12.2% in 2012 to 13.4% in 2015 In the future, we expect further growth in the share of Russia on the Japanese sawnwood market Source: FAOSTAT Share of Russian soft sawnwood on Japanese market RusForest s competitive advantages on the Japanese sawnwood market Consistently high sawnwood quality Stable delivery volumes Comparatively close to market Extensive management s experience on the Japanese softwood market Source: Japan Lumber Journal 9

10 Markets (2 of 2) RusForest s sales to Japan RusForest has stable sales to the Japanese sawnwood market with premium prices The share of the Japanese market in RusForest s sales increased from 6.9% in 2012 to 45% in 2015 In , RusForest strengthened its sales on the Japanese market by increasing the volume and quality of sawnwood, delivered from Magistralny RusForest is the 6 th largest Russian sawnwood exporter to Japan (in terms of volume) with the share of 4.9% RusForest s share in Russian exports of softwood sawnwood to Japan Largest Russian sawnwood exporters to Japan in 2015 Source: Russian Customs RusForest s sawnwood sales in

11 Forest Leases RusForest s AAC utilization m AAC 3,608,460 1,703,660 1,063,860 Own harvesting 798, , , mln m 3 incl. core 260, , ,000 % utilization 22.1% 19.4% 42.3% 0.54 mln m 3 Divested (Arkhangelsk, Boguchany) In 2012 RusForest harvested not only in core asset Magistralny, but also in lease areas of Arkhangelsk and Boguchany. These non-core assets (AAC 1.7 mln m 3 ) were later divested. In 2015 RusForest also started to consolidate control over good forest lease assets in Ust-Ilimsk (Vanavarales and Taiga-2003) 11

12 Management Structure Board of Directors Audit Committee 100% ownership* RusForest AB 100% ownership Operations Committee RusForest Management Group LLC act as Management Company RusForest Ust-Ilimsk RusForest Magistralny Lesresurs** * One subsidiary in Ust-Ilimsk - Taiga-2003 is owned 60% by RusForest AB ** RusForest Management Group LLC also acts as Management Company for the Company Lesresurs. Lesresurs is not owned by RusForest, but is a related party 12 RusForest Group Senior Management Anders Börjesson CEO of Swedish holding company RusForest AB, overseeing all corporate and legal matters of group structure. Based in Stockholm. Anton Bogdanov CEO of RusForest Management Group LLC, which acts as management company,overseeing and controlling all the commercial and production activities of the Russian operating entities. Based in Moscow. Gustav Wetterling Group CFO. Based in Stockholm.

13 13 Recent Development

14 Q Key Results USD 5.8 MLN USD 2.1 MLN USD 3.0 MLN USD 1.4 MLN CASH Revenue Other Income EBITDA Net Profit Increase in revenue by 18% driven by the new projects in Ust-Ilimsk and Pellets in Magistralny Significant other income related to sale of non-core forest lease areas in Ust-Ilimsk. Significantly increased EBITDA, driven by income from non/core sales but also core EBITDA improvements. 4 th consecutive quarter with net profit. Non-core sales push result over the net profit line but also adjusted Q was good, given it is the seasonally weakest. Income parameters ( USD mln) Q Q Revenue EBITDA Adjusted EBITDA Operating profit/(loss) 1.9 (0.7) Profit/(loss) for the period 1.4 (1.6) Net income/(loss) per share (SEK or USD per share) 0.01 (0.01) Balance parameters (USD mln) 30 Jun Dec 2015 Cash balance Working capital Net debt (12.4) (8.3) 14

15 Non-core Assets Sale Summary As reported the main stage of forest lease optimization is now finished. Key benefits from forest non-core leases divestment: In all divested areas harvesting operations were unprofitable. Divestment of lease areas with high proportion of hardwood. For example, in some UI leases the yield of sawlogs was less than 35% compared to 90% in best leases. Reduction of risks of potential forest fires and costs associated with fires fighting. For example, Kachug lease area suffered from fires during summer 2016 after divestment by RusForest. The following leases were sold: Time period Area, ha AAC, m3 Profit* Q1 Q , , MUSD *USD 2.7 recognised in 1H2016 and income of USD 0.5 million will be recorded in Q Current forest lease portfolio, as of August 2016: Lease agreement Area, ha AAC, m3 Ust-Ilimsk 202, ,160 Magistralny 514, ,700 TOTAL 716,987 1,063,860 Elimination of risks of old illegal cutting and forestry violations. 15

16 Magistralny Business Unit Magistralny stable and profitable operations further improved by the new pellets facility Magistralny - Pellets production More efficient utilisation of forest resources Stable sawmilling Pellets production developing as planned, to ramp up further by year-end Continued difficult market conditions on North African markets Japanese market stable, China recovering The Russian ruble continues to be a cost advantage, however it recovered some recently and there is local cost inflation Magistralny - % of harvested m 3 from own forest leases Magistralny sawmilling Magistralny - EBITDA 16

17 Ust-Ilimsk Business Unit Ust-Ilimsk Forest assets optimised, own harvesting developing and subcontracting to disappear. Current situation: Increased subcontracting has previously helped to reduce losses in Ust-Ilimsk but development of own harvesting necessary to reach profitability given pricing environment in subcontracting. New own harvesting operations progressing well, a 2 nd harvesting chain launched in August Forest lease divestments have optimised the forest lease portfolio in Ust-Ilimsk One further project for buy-out of minority shareholder in forest company ongoing (AAC 128,000 m 3 ) Ust-Ilimsk subcontracted harvesting Ust-Ilimsk own harvesting Ust-Ilimsk EBITDA 17

18 Corporate Corporate significant reduction in overhead costs and more transparent and efficient legal structure Current situation: Significant reduction in overhead costs from personnel optimisation and general cost control Legal structure fine-tuning continues Strong financial position No Group legal entities (end of period) Net Debt (end of period) Corporate overhead costs 18

19 19 Conclusion

20 Conclusion Summary: Swedish forestry company operating in Russia Vertically integrated from timber leases to sawmilling and wood pellet production High-quality, slow-growth forests Close proximity to main markets in Japan and China Strong management team Experienced Board members Next operational steps: Continuous improvement of Ust-Ilimsk harvesting operations Further simplification of the corporate structure Review of Magistralny long-term best sawmill strategy 20