Third Irish forestry fund.

ForFsSake wrote: »

I am not qualified to make any sense of the numbers but page 3 of the accounts on the 3rd forestry fund reads to me like we need to start expecting the worst. The positive tone from the previous letter is certainly missing here.... This isn't good!


"As reported in prior years, the Company is facing significant new risks with others beginning to emerge. The new risks facing the company could not have been foreseen when the Company launched and have only developed over recent years. These include Brexit and a worsening US-China international trade war. Britain remains the largest export market for Irish timber products with upwards of 60% of Irish processed timber being exported into the British market. While Britain will continue to require timber imports, there are many sources for such timber, and it remains unclear what customs tariffs and administrative procedures will emerge which could act as barriers to Irish exports. The impact of tariffs, or any delays to the export of timber products into the British market, is likely to cause a fall in timber prices for forest owners, the magnitude of which is unknown at the current time.

Equally, the emerging international trade war creates significant new risks for the company. If existing trade flows for timber are interrupted, especially where these impact substantial export markets such as Scandinavia, it is likely that the British market will become better supplied by markets that compete with Ireland for access to the UK. Clearly this will result in falls in timber prices and such a situation has been experienced in the past.

New risks that are now emerging and which may impact on the company’s future performance include climate change and Ireland’s general economic performance. There are increasing warnings emerging about the risks facing the Irish economy. Should the Irish economy experience another downturn in the coming years it will have an impact on the Company. Experience demands that the Company must avoid seeking to sell its portfolio during such recessionary times. It is to be noted that Brexit is often cited as being the most likely catalyst for such a downturn and therefore this subject matter could have an even greater impact on the Company’s performance than has been outlined earlier in this report.

Climate change is currently impacting timber flows across Europe. Unusually hot and dry summers in central Europe have promoted the outbreak of a particular pest and this has resulted in a glut of timber emerging into the European timber market as local governments seek to control the outbreak. While the Irish forestry sector must remain vigilant against the introduction of the pest into Ireland, the oversupply of timber in central Europe is resulting in more imports entering Britain from the continent. The effects of this are already visible in Ireland with reductions in timber prices being reported in the first half of 2019.

As reported in prior years, the directors have been investigating various strategic initiatives for the benefit of the Preference Shareholders. It was noted in prior years that this strategic flexibility would include the early disposal of the Company’s forestry assets. During the period the Company received a compelling offer from a significant international investor for the Company’s forest portfolio. In light of the information available to the Company, and in consideration of the new risks identified in this and in prior year’s reports together with those pre-existing risks intrinsic to forestry, the directors are convinced that it is in the Preference Shareholders’ best interest to lock in the value that they already have in their portfolio. The directors have therefore taken the strategic decision to dispose of the Company’s forestry assets and return all profits to the Preference Shareholders."