Money in trees for HK company
After four years of losses while working as a supplier of building materials, Sustainable Forest Holdings switched to forestry - it bought rights to log forests in Brazil and Russia, and has now reported a net profit of HK$274.3 million.
The company last year won a contract with Santo Antonio Hydroelectric Power Plant in Brazil to clear 200,000 hectares of forest for the power plant's artificial lake and plant sites. China Construction Bank International Securities analyst Yan Tsui attributed most of the profit to the clear-felling project.
According to its financial statement for the year ended March 31, more than 90 per cent of the company's revenue came from the five-year Santo Antonio project in Rondonia State in Amazon. The firm estimated it would make a gross profit of HK$135 million from logging from this one-off agreement, higher than the CCB forecast of HK$57 million.
Sustainable Forest has 44,500 hectares of natural tropical forest lands on a freehold basis in Acre State in Amazon region and 242,000 hectares of concession rights in Siberia. But turnover from the sustainable management of these forests only amounted to about HK$26 million.
'I believe it still has enough assets to make a profit but obviously the clear-cut project helped to boost its revenue,' Tsui said.
It sold its building materials and real-estate businesses, booking a net loss of HK$23.1 million.
Since swapping its building material and property operations for timber, Sustainable Forest has attracted new investors.
NWS Financial Management Services, owned by NWS Holdings, conglomerate flagship of New World Development, became the forest firm's second-largest shareholder after buying HK$206 million worth of new Sustainable Forest shares in May.
Because Sustainable Forest is a new forestry operator, Tsui believed it would be hard for it to borrow from banks, leaving equity financing as its best option to fund acquisition and expansion.
Wild business
The Brazilian jungle holds big opportunities
Forsaking building materials made a profit for Sustainable Forest Holdings, in millions of Hong Kong dollars, of: 247
