RusForest to shift sales from Middle East to Japan and China

Rusforest Group issued annual report for 2012. Company’s total turnover for 2012 amounted to SEK 564.3 million ($85.5 million) compared to SEK 409.4 million ($62 million) in 2011. These results were affected by the inclusion of income and expenses of the acquired subsidiaries (Kansky, Adar and the NTG companies), making the data for 2012 not comparable to the figures reported in 2011.

The Group’s net loss for 2012 was SEK 1,086.1 million ($164 million). Included in the current year’s result was a loss of SEK 521.8 million ($79 million), which related to the impairment of assets (both continued and discontinued).

“Our new Russian shareholder, Nova Capital, adds the local execution capability that RusForest previously lacked. Nova has valuable experience running a profitable forestry business in Eastern Siberia and is today one of the largest Russian exporters of sawnwood to Japan, the market with the highest price in the world for Russian red pine structural and appearance grade sawnwood. RusForest can benefit from significant sawnwood price increases by shifting our sales to new products and markets”, commented Chief Executive Garrett Soden.

“North American sawnwood prices have increased by more than 40% over the last year and are now at a seven-year high. Rising lumber prices in North America have caused softwood lumber prices in Japan and China to increase in the last six months. Most importantly, we are beginning to see sawnwood prices increase in Europe as well. The market fundamentals in Europe are strong for a rally in sawnwood prices as the US housing recovery gains momentum and demand improves in China. Long-term, the global sawnwood supply-demand balance is expected to tighten as European sawnwood production is diverted by higher prices in North America, Japan and China and the mountain pine beetle infestation begins to reduce Canadian sawnwood exports”, Soden continued.

RusForest is well placed to benefit from improving global markets. Eastern Siberia has some of the highest-quality, lowest-cost timber in the world, he said.

Over the last ten years, Europe has reduced its imports of sawnwood from Russia while China, the Central Asian countries, the Middle East and North Africa have increased their imports significantly. Russian sawmills have been capitalizing on growing export demand in non-European countries as Europe has become a net exporter of sawnwood during the last ten to fifteen years.

Egyptian market which is historically important for Russian producers is now quite unstable due to financial challenges and will likely experience decreased lumber imports in 2013, as said in the outlook section.

The company hence is changing its customer base gradually from North Africa and Middle East towards Japan, China and Europe.