RusForest sold Shenkursk and Ust-Ilimsk sawmills as non-core assets

Swedish company RusForest operating in Russia has closed the sale of Shenkursk sawmill in Arkhangelsk region for $1 million. The sawmill has an annual capacity of 80,000 cubic metres of sawnwood, but it has no forestry leases nearby and is dependent on third parties for sawlogs.

In addition, RusForest recently sold non-core assets in Ust-Ilimsk (Irkutsk region, Eastern Siberia) for RUB 82 million ($2.6 million). These assets include a sawmill with annual sawnwood capacity of 60,000 cubic metres and nearby forestry leases in the Tuba area totalling 55,309 hectares with 110,000 cubic metres of annual allowable cut. The sawmill equipment requires additional investment, and the forestry leases have been extensively harvested, company said.

The company has also entered into a preliminary agreement on the sale of its wood pellet production equipment located in Liepaja, Latvia for €375,000. The equipment has an annual capacity of 80,000 tonnes, but it has been idle for several years. Moreover, RusForest has entered into an agreement for the sale of its gravel asset, Belomorsky Karyer, in Karelia.

The sale of these non-core assets reduces RusForest’s loss-making operations and allows management to focus on improving the Company’s core operations. Some of the transactions described above include deferred payment terms.

Meanwhile, RusForest announced preliminary 1Q 2013 production results for its operations in Arkhangelsk, Boguchany and Magistralny. Lumber production grew by 47% to 70,412 cubic metres. Harvesting of sawlogs increased by 69% to 245,976 cubic metres.

Anton Bogdanov, the Company’s COO, commented, “Our 1Q production showed improvement from the comparable period due to the deployment of new harvesting groups and the finalization of sawmill reconstruction. Since I joined the Company in March 2013, we have started to sell small volumes of sawnwood from Magistralny to Japan at prices more than 30% higher than the company’s previous sales to the Middle East and North Africa. We have also replaced all local harvesting and sawmilling CEOs in our effort to increase capacity utilization and reduce per unit costs.”