Interview with Johan Larsson from The Forest Company (TFC).
TFC invests in sustainable forest plantations in South America, building an attractive timber portfolio that combines yield and capital returns.
The market opportunity right now is very good. The use of wood fibre in the world is increasing and there is more and more demand from end users such as bio-energy, packaging (due to increased Internet trading) and hygiene products. So, the demand for forestry products is very strong.
Our end-market is growing. At the same time, we have a lot of investment opportunities, especially in emerging markets such as South America where the fibre and the industry are growing very quickly. Hence, we see opportunities to grow there.
Combining financial returns with high social and environmental impact
Our investments do not only generate income yield, but also an impact in the local communities in which we invest.
We also think that forestry is a unique asset class because you combine income yield, form the harvesting of the wood generating operating cash flow, with the capital appreciation of the asset, of the land and the trees, that you have over time. You can increase the value of the asset by doing for example genetically improve plants and thereby planting better trees each year. You can also improve the technology used to grow the trees.
The Forest Company
TFC has been in operation since 2007. We are a solid operating company and we have investments in Brazil and Colombia. We harvested 1.4 million cubic meters last year. We employ about 1000 people through our organisation, mainly indirectly via service providers.
We provide a unique opportunity for our investors, giving them a stable operating cash flow, a dividend from these investments. At the same time, we see the opportunity to grow the portfolio with new investments.
A unique investment opportunity
We are a quite unique as we focus on sustainability aspects. We have a very strong social impact in the products we invest in. Also, we are an evergreen vehicle: new investors get immediate exposure to the existing portfolio, its operating cash flow and the dividends it is generating.
We have been in operation for 10 year and we have identified a lot of investment opportunities that we can execute efficiently and at a low execution risk.
When we raise money, we can invest that into the existing projects and grow them by for example buying a neighbouring farm. Hence, growing the projects in terms of size and operating cash flow at a very low execution risk and transaction cost.