OREANDA-NEWS. December 06, 2012. RusForest’s net loss for 3Q 2012 was SEK 110.1 million (USD 16.6 million) compared to SEK 77.5 million (USD 11.7 million) in 3Q 2011. Included in the current quarter was loss of SEK 32.9 million (USD 5 million) from discontinued operations related to the fair valuation of assets classified for sale in 3Q 2012, i.e., planing mills in Arkhangelsk and Ust-Ilimsk, as the company said in the press release received by Lesprom Network.

RusForest shipped 73,846 cubic meters of sawnwood in 3Q 2012 which is comparable to 78,863 cubic meters in 2Q 2012 but slightly less due to a temporary shortage of vessels in Arkhangelsk in September 2012.

The revenue decreased in line with volumes from SEK 106.3 million (USD 16 million) in 2Q 2012 to SEK 100.1 million (USD 15 million) in 3Q 2012. The price did not change between 2Q and 3Q 2012. Q3 2012 was not comparable to 3Q 2011 due to acquisitions and construction.

Financial income of SEK 7.8 million (USD 1.2 million) represented foreign exchange gain due to depreciation of USD against RUB while bank loans and leasing payables are mainly denominated in USD.

In Q3 2012 and 3Q 2011, RusForest recorded the full quarterly amount of interest payable on bonds issued in May 2011.

Garrett Soden, the Company’s CEO, commented, “Our 3Q results show a seasonal improvement on the previous quarter due to a reliable supply of sawlogs and increased sawnwood production. We have reduced loss-making operations in Arkhangelsk, Shenkursk and Ust-Ilimsk, and we are focusing on our core operations at LDK-3, Boguchany and Magistralny. We continue to negotiate the sale of non-core assets and review strategic alternatives.”

RusForest’s results were affected by the inclusion of income and expenses of the acquired subsidiaries (Kansky, Adar and the NTG companies), which make the data for 2012 not comparable to the figures reported in 2011.

Although the Group's EBITDA in 3Q 2012 was affected by certain non-recurring items (as presented below), the Group continued to incur losses at the EBITDA (operations) level. Recognized earnings before interest, tax, depreciation and amortization (“EBITDA”) of SEK -32.4 million (USD 4.9 million) and SEK -193.9 million (USD 29 million) for the three and nine months ended September 30, 2012, respectively.

In 3Q 2012, the seasonality factor was minimal. Also, the results of previous investments and construction were finally seen in 3Q 2012. Supported by a stable supply of sawlogs from harvesting operations, the sawmilling segment showed positive EBITDA dynamics with noticeable improvements in Arkhangelsk and Boguchany. In Arkhangelsk, this was the result of a change in management in 4Q 2011 and implementation of improvements by a team of German engineers in 1H 2012. In Boguchany, the sawmill was fully supplied with sawlogs sourced from own harvesting and showed increased, stable production.

Non-performing units (Ust-Ilimsk and Shenkursk) continued to have a negative effect on the Group's EBITDA but to a lesser extent in Ust-Ilimsk where the sawmill was leased out for the full 3Q 2012 and contributed small positive EBITDA margin.

In 4Q 2012, management continued to implement actions listed in the 2Q2012 report to improve price realizations and reduce costs (i.e., increase utilization of capacity throughout the production chain, divest non-core assets, and streamline the corporate and management structure).

RusForest is a Swedish forestry company operating in eastern Siberia and the Arkhangelsk region of Russia. The Company controls approximately 3 million hectares of timber through long-term leases with an annual allowable cut (“AAC”) of approximately 3.6 million cubic meters. RusForest owns five sawmills in close proximity to its forest leases and is self-sufficient in raw material to produce more than 400,000 cubic meters per year of sawnwood products.