Russian sanctions lead to mill sale19 January 2015
Russian sawmiller RusForest has sold its Arkhangelsk sawmill and related assets because the ongoing Ukraine crisis and sanctions against Russia has made modernisation impossible.
The assets in northwest Russia have been sold for US$31m, including the related debt to several buyers, including ZAO Lesozavod 25. They are buying the LDK-3 sawmill and related pellet mill, as well as forest leases and harvesting companies in the region.
The company said the sawmill was outdated and required significant investment for modernisation.
“The management of RusForest evaluated the possibility of building a new sawmill in Arkhangelsk, but, due to the ongoing crisis in Ukraine and the related sanctions against the Russian financial sector, RusForest concluded that it is not possible to finance the construction of a new sawmill at the LDK-3 site without significant shareholder dilution,” the company said.
“The company has therefore decided to divest the entire Arkhangelsk operation in order to focus on RusForest’s profitable operations in Eastern Siberia.”
The Arkhangelsk sawmill has an annual capacity of 120,000m3 of sawn timber, while the pellet mill has an annual capacity of 100,000 tons of pellets. The mill and harvesting company Severny Les hold forest leases with 851,000m3 annual allowable cut.
RusForest will receive US$12m net cash from the sale.
The CEO of Rusforest Matti Lehtipuu resigned at the end of 2014 after leading the turnaround of the group. Rusforest chairman Garrett Soden paid tribute to the hard work of departing CEO, who left to pursue other interests.
“Matti has been instrumental in completing the turnaround of RusForest into a streamlined forestry operation with high-quality assets in Eastern Siberia.
“Thanks to the hard work of the management team over the last couple of years, RusForest is nearly debt-free and generates significant cash flow in US dollars.”