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US carmakers, Brazil soy farmers drive timber fund fortunes

US carmakers, Brazil soy farmers drive timber fund fortunes | Timberland Investment | Scoop.it

US automobile production may have risen at its fastest in five years last month. But it is not enough to help out struggling Phaunos Timber Fund, for which a wet Brazilian soybean harvest, would also help reverse its somewhat disappointing performance.


The first public report by forestry consultancy Stafford Timberland of Phaunos's assets, which recommends the sale of at least one of the investments, has revealed the breadth of the influences on the performance of the portfolio. These include well-recognised drivers, such as the performance of China's construction industry, a well-documented, major timber consumer, likes its peer in the US, but whose slowdown prompted a 16% drop in lumber imports in the January-to-March period, compared with the quarter before. The impact, thanks to raised log inventory levels at Chinese ports, has been a 20-30% slump in log prices in the April-to-June quarter in New Zealand, a major timber exporter, where Phaunos Timber Fund owns 35% of forestry group Matariki.
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Other factors influencing Phaunos's fortunes include the fate of the soybean harvest in Brazil, where it owns outright Eucateca in the major corn and soybean growing state of Mato Grosso. Eucateca, besides owning teak plantations, which it has failed in an effort to sell, provides eucalyptus as a biomass fuel for drying crops.


And US auto production is also a driver, through its consumption of pig iron which has, historically, been largely sourced from Brazil. Phaunos's 19,000-hectare Mata Mineira operation in Minas Gerais, a state better known for coffee production, provides eucalyptus logs for converting into charcoal, in turn a major component of pig iron. "[Brazilian] pig iron produced from charcoal has declined by approximately 33% since 2007, due in part to decreasing US demand and unfavourable exchange rates," Stafford said.
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Stafford gave its insight into the Phaunos portfolio as it recommended the sale of some investments deemed "higher risk", including some which comprised immature trees too young to harvest.

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Phaunos Timber Fund Appoints Stafford Timberland As Asset Manager

Phaunos Timber Fund Appoints Stafford Timberland As Asset Manager | Timberland Investment | Scoop.it

Phaunos Timber Fund Ltd Tuesday said it has reached a deal with Stafford Timberland Ltd to manage its portfolio of assets, after Stafford suggested some changes to its portfolio after conducting a review.


Stafford was initially employed to carry out a strategic review of Phaunos' assets, and has now completed its review. The main findings of the review included the finding that recent falls in log prices in China could hit the fund's cash flows in the second half of the year, and it should seek to exit some of its higher- and medium-risk assets on its portfolio.
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The review also found that Phaunos has interests in good quality timberland assets in Matariki, Aurora Forestal and Mata Mineira, which make up 56% of the fund's neta sset value in total and represent a good base from which to build the portfolio. However, 36% of the portfolio is made up of higher-risk assets, a bigger proportion that would normally be expected in a balanced timberland portfolio.


Stafford also warned that Phaunos is reliant on a relatively small number of mature timberland assets for annual cash flows and these assets are subject to export or single product market risk. There are several assets whose valuations are subject to significant uncertainty and a forced liquidation value could be more than 30% below the December 2013 net asset value, it added.
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[Phaunos] said it will pay [Stafford] an annual management fee of 0.35% of the market capitalisation of Phaunos shares, payable quarterly in arrears.

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Phaunos Timber Fund notes investee acquisition

Phaunos Timber Fund notes investee acquisition | Timberland Investment | Scoop.it

Phaunos Timber Fund [LON:PTF], the Authorised Closed ended investment scheme established to invest in timberland and timber related assets on a global basis, has today been notified that Green Resources, in which the Company holds a minority stake, has signed an agreement to acquire the Global Solidarity Forest Fund. 

GSFF is the leading forestry company in Mozambique, with assets that are adjacent to Green Resources' operations. 

Under the terms of the deal, Green Resources will issue 17.8 million new shares at $5.90 (NOK 35) per share to acquire the assets and outstanding cash of GSFF. As at 31 December 2013, Phaunos held Green Resources shares in its accounts at a value of $4.27 per share. The new shares will represent 28.8% of the post-transaction shares in issue. As a result of the new share issue Phaunos' holding in Green Resources will be diluted to 18.9% from 26.6%. It is envisaged that the acquisition will create significant scale and operating synergies for Green Resources. The combined company will have 40,000 hectares of standing forest and significant industrial operations in Mozambique, Tanzania and Uganda.

Completion of the deal is contingent on a vote of approval at an Extraordinary General Meeting of Green Resources, currently scheduled for 13 May 2014.

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Phaunos Timber Fund's FY loss widens to $55.4m

Phaunos Timber Fund's FY loss widens to $55.4m | Timberland Investment | Scoop.it

Phaunos Timber Fund's FY loss widened to $55.4m, from a loss of $43.2m. Net asset value was $419.0m, from $488.4m. NAV/share was $0.78, from $0.91. It paid nil dividend, from a total of $13.4.

The major drivers of change in the Company's NAV included:

- Unrealised foreign exchange losses totaling $25.4m, which includes losses of $8.6m (against the Norwegian Krone and the New Zealand dollar) relating to financial assets; and losses of $16.9m (mainly against the Brazilian Real) relating to the translation of wholly-owned subsidiaries. 

- Unrealised valuation losses on biological, land, and financial assets totalling $25.2m, excluding foreign exchange. Included in this unrealised loss is the significant revaluation loss of $40.7m in Green Resources, which was partly offset by the revaluation gain in Matariki of $24.0m (see the Explanatory Notes to the Consolidated Statement of Comprehensive Income for further details). 

- Net operating losses of $9.5m includes revenue from timber operations and other operating income totalling $12.3m, less expenses totalling US$21.8 million (see the Consolidated Statement of Comprehensive Income for further details). 

- Non-recurring items totalling $6.5m which includes the Investment Manager termination and restructure costs of $5.5m. 

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Phaunos Timber widens H1 pretax loss to $19.2m

Phaunos Timber widens H1 pretax loss to $19.2m | Timberland Investment | Scoop.it

Phaunos Timber widened its first-half pretax loss to $19.2 million, from $15.4 million. Total income was -$6.8 million, from -$1.8 million. NAV/Share was $0.85, from $0.97.


"We made good progress in our strategy to unlock value and concentrate on core operations with a further asset sale at Pradera Roja recognising a 28% premium to book value, completion of the sale process at Forest Enterprises and further progress in the Southern China disposal programme," the company said.


"As individual markets continue to recover at varying speeds, management will focus on exploiting Phaunos' global diversification to capture that recovery as it unfolds. Management will continue with its strategy to improve operational efficiencies across the portfolio and consider selective asset sales where good returns can be realised. We continue to believe that the Portfolio is well positioned to meet its performance objectives for investors."

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Phaunos Timber Fund sells Uraguayan property

Phaunos Timber Fund sells Uraguayan property | Timberland Investment | Scoop.it

The Board of Phaunos Timber Fund Limited ("Phaunos" or the "Company") is pleased to announce the sale of the Don Chico plantation, part of Phaunos' Pradera Roja investment for US $5.7 million, payable to the Company in cash in US dollars. Don Chico is located in eastern Uruguay and is comprised of approximately 1,567 hectares with over 700 hectares planted in various Eucalyptus species. The Don Chico land was purchased in 2009 for US $2.9 million. Don Chico represents 13% of the Pradera Roja estate of 11,921 hectares. The Pradera Roja investment was valued at US $32.2 million as at 31 December 2011. The portion of this value attributable to Don Chico as at 31 December 2011 was approximately US $4.1 million.

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The buyer of the Don Chico plantation is Bosques del Uruguay, an institutional timberland investor that invests in sustainable Eucalyptus plantations in Uruguay. 

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Trust forced into capital raise to stave off bankruptcy

Trust forced into capital raise to stave off bankruptcy | Timberland Investment | Scoop.it

The £420 million Phaunos Timber  fund has announced an emergency equity issue to prevent it going bust.


The London-listed trust warned that ‘as a consequence of a number of changed circumstances’, which include a suspension of dividends from one of its holdings due to reduced timber prices in China, there was ‘material uncertainty over the immediate liquidity requirements of the company and its cash position’.


The board concluded that ‘without action, the company may be unable to pay its liabilities as they fall due within the next three to six months’.

Phaunos Timber has therefore proposed an equity injection through the placing of approximately 5% of its issued share capital ‘within the next few weeks’. Both the trust’s board and manager, Stafford Timberland, will participate in the placing.

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Forestry companies with operations in Mozambique merge

Forestry companies with operations in Mozambique merge | Timberland Investment | Scoop.it

The merger of the Global Solidarity Forest Fund (GSFF) with Green Resources (GR), including all assets in Mozambique, has created the biggest forestry company on the continent outside of South Africa, according to an official statement.


The new company, which was created by issuing 17.78 million new shares to be handed over to GSFF shareholders, now has over 40,000 hectares of standing forest in Mozambique, where both countries had operations, in Tanzania and in Uganda.

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Green Resources is one of the largest forestry companies in Africa and is one of the main wood production companies. It was founded in 1995 as a private company in Norway and it has invested over US$125 million in its operations in Africa.


Green Resources, whose two main shareholders are the Phaunos Timber Fund with 27 percent and NewAfrica with 19 percent, has plantations in Mozambique’s Niassa and Nampula provinces.


Global Solidarity Forest Fund AB was an investment company particularly focused on Mozambican forestry sector companies. It was founded in 2006 in Hallstahammar, Sweden.


According to information taken from the Internet Global Solidarity Forest Fund’s shareholders were the Netherland’s state worker pension fund (54.5 percent), a number of Swedish and Norwegian religious organisations and US fund Diversified International Timber Holdings.

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Timber! Phaunos fund axes dividend for two years

Timber! Phaunos fund axes dividend for two years | Timberland Investment | Scoop.it

Phaunos Timber, a Guernsey-based investment company named after the Roman god for forests, has its work cut out if it’s to survive a continuation vote in two years’ time.


With shareholders having lost more than a third of their money over five years, Phaunos, which invests in tree plantations around the world, needs to pull something out of the woodwork fast if it’s to get the chance to seek investors’ backing at the annual general meeting in 2016.


Although that’s some way off events are conspiring to make time seem short for the trust’s board, led by Sir Henry Studholme, who is also chairman of the Forestry Commission for England and Scotland.

Last week the £141 million trust, which does its business in US dollars, revealed losses last year rose to $55.4 million (£33 million) from $43.2 million (£25.6 million) in 2012, a loss per share of 10.32 cents.


Falls in the Norwegian krone and Brazilian real against the dollar and more realistic assessments of its younger plantations, which saw $40 million written off an investment in Green Resources in east Africa, more than offset improved demand for timber in the US and China. Net asset value plunged to $419 million (£249 million) from $488 million.


While these were paper losses, Phaunos lost real money too with net operating losses of $9.5 million narrowing from a deficit of $12.3 million in the previous year.


As a result Phaunos scrapped the annual dividend for 2013 and said it was unlikely to have enough cash to pay one next year.


The lack of cash means there is no money to buy back shares and do something about the yawning 43% discount to NAV at which the shares trade, having slipped a further 10% this year.

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Phaunos terminates investment management agreement with FourWinds

Phaunos terminates investment management agreement with FourWinds | Timberland Investment | Scoop.it

Phaunos Timber Fund has reached agreement by mutual consent to terminate its investment management agreement with FourWinds Capital Management with immediate effect. The company has established a new subsidiary, Phaunos Boston, through which it intends to manage its assets.


The majority of the employees of the FourWinds Capital Management group (the FWCM Group) who have been responsible to date for the day to day management of the company’s portfolio of assets will be offered employment with Phaunos Boston with immediate effect.

The subsidiary will initially be led by Mason Browne, formerly director of timber operations at FourWinds. Property management of the company’s wholly owned assets will continue to be carried out by local management teams in the countries in which they operate.
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The board has entered into a consultancy agreement with Stafford Timberland to provide a review of the company’s timber assets in close consultation with Browne and his colleagues. Stafford Timberland, which is authorised and regulated by the Financial Conduct Authority in the UK, is a global timberland investment organisation that manages approximately USD1.4bn in timber assets worldwide on behalf of institutional investors. The board expects to announce the results of Stafford Timberland’s review with the company’s annual results for the year ended 31 December 2013, in April 2014.

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Phaunos Timber Fund sees NAV decline in 2012

Phaunos Timber Fund sees NAV decline in 2012 | Timberland Investment | Scoop.it

Phaunos Timber Fund, the investment scheme managed by FourWinds Capital Management, saw its net asset value (NAV) decline by $70m in 2012 during a challenging year for global timber markets.


Revenues dropped from $18.8m to $15.6m during the year, which the firm said was largely due to a 70 per cent reduction in income from its Matariki asset $4.4m.


At the end of 2012, NAV stood at $488.4m compared with $558.8m the previous year.


Liane Luke, head of timber at FourWinds Capital Management, said, ‘2012 was a challenging year for global timber markets, with signs of recovery in the US offset by generally flat markets elsewhere.

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Phaunos Timber Fund stung by strengthening dollar

Phaunos Timber Fund stung by strengthening dollar | Timberland Investment | Scoop.it

Sustainable timber investment company Phaunos Timber Fund reported a $9.6 million loss in 2011, reversing 2010’s $20.7 million profit, largely due to paper losses on its foreign currency conversions and revaluation of its assets.


The fund has invested in timber-related assets in countries including Brazil, China, New Zealand and Uruguay, but the strengthening of the US dollar towards the end of 2011 led to some $20.9 million of unrealised losses on currency translations, it announced in its annual results today [April 19].


The value of some investments was also cut, notably its stake in Green China, whose valuation was slashed by one-quarter over the last year, to $15 million. This 6,500-hectare pine and fir plantation was hit by the scandals at Sino Forests and China Forestry Holdings, which has increased the perceived risk in the Chinese timberland market “despite the fact that Green China’s business model is fundamentally different to Sino Forests’,” according to the fund’s investment manager, FourWinds Capital Management.

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