A new actor at the timber market of Arkhangelsk Region to compete for the leading positions

Haing received Russian anti-monopoly approval RusForest AB (Sweden) has completed the acquisition of 86 percent of OAO "LDK-3", a sawmilling operation located in Arkhangelsk and 100 percent of OOO "Infa", a planing mill at the same site from Nothern Shipping Company JSC (NSC).

The acquisition brings RusForest's consolidated Annual Allowable Cut and sawmilling capacity to 1.62 million m3 and 300,000 m3 respectively, and enables RusForest to establish a strong presence in Russia's three largest and most developed forestry regions (Arkhangelsk, Irkutsk and Krasnoyarsk). The transaction marks an important step towards RusForest's goal of becoming a leading independent integrated forestry and sawmilling company in Russia, with an annual harvest of 1.8-2.0 million m3 and an annual sawnwood production of 550,000-600,000 m3 during the next four years.

LDK-3 currently has approximately 848 shareholders and through the acquisition of 86 per cent of LDK-3, RusForest will be obliged to make a mandatory bid for the remaining shares. Having reached critical size, RusForest aims to initiate the process for listing on NASDAQ OMX Stockholm.

Earlier, in May 2010, Rusforest and Nord Timber Group (NTG) have merged the two companies by way of a directed share issue in RusForest, payable in kind. The new company formed through the merger will be ideally placed to supply the domestic Russian market and the European market from North West Russia as well as the fast growing Asian and Central Asian markets from Siberia. The company plans to become one of the top 5 forest-controlling companies in Russia.

"The challenge for Finnish and Scandinavian sawmills is to secure enough raw materials at competitive prices in order for them to continue to run their mills. In a market where all main actors are price takers, our ultimate advantage is lower production costs and the fact that we control the essential raw material flows through a combination of own forest leases and harvesting capacity", says Martin Hermansson, founder and shareholder of Nord Timber Group, Arkhangelsk.

Nord Timber Group has a large presence in the Arkhangelsk region of North West Russia, with a leased forest area of more than 1.0 million hectares of quality forests. Harvesting in NTG is expected to reach 400,000 m3 in 2010. In addition to currently available sawmilling capacity the company is going to increase total drying capacity towards 120,000 m3.

Through a series of acquisitions and development projects RusForest increased sawnwood production by 37.9% in 2009, to 166,333 m3, in spite of weak market conditions. The company leases over 850 thousand hectares of forest land. RusForest has a number of exciting development projects, in particular the turn-key sawmill in Magistralny which is expected to add a further 50% to RusForest's sawnwood volumes upon completion. 

Vostok Nafta Investment Ltd, the largest shareholder of RusForest with an ownership of 49,9 percent, give their strong support to the transaction and intend to work together with RusForest to raise the capital needed to develop the company into one of Russia's leading forestry players.