Phaunos Timber reports on progress within the underlying portfolio for the first six months of 2015 but a fall in NAV on the back of the strengthening of the US dollar.
At a timber operating level the Group showed a profit for the first time. This amounted to $1.7m for the period (30 Jun 2014: $1.5m loss). The unaudited NAV at 30 June 2015 decreased by 10.7% or $34.2m to $287.1m (31 Dec 2014: audited NAV of $321.3m). This decrease is mainly a reflection of changes in foreign exchange rates. The NAV per share fell from 57 cents to 51 cents while the share price fell from 37 cents to 35 cents, reflecting a narrowing of the discount from 35% to 31%.
The company’s cash reserves increased to $23.0m (31 Dec 2014: $14.9m) over the period with $7.5m received from a one off harvesting contract at Mata Mineira in Brazil. This harvesting revenue was ahead of the initial 2015 budget guidance as a result of a one-off contract with Suzano to harvest timber in Mata Mineira. 96% of the total harvesting contract value was received by 30 June 2015. Smaller harvesting contracts at Pradera Roja and Eucateca also contributed to the increased timber revenue for the period.
Potential buyers have been identified for individual properties within the Eucateca (Brazil) and Pradera Roja (Uruguay) estates. Negotiations are underway. The total proceeds of these potential asset sales are estimated at $6m, in line with their current overall NAV. They say work continues on the disposal of other assets identified as higher risk or non-core.
To ensure more reliable dividend income from 2016 onwards, Phaunos has worked with Rayonier to reduce or eliminate gearing within Matariki, Phaunos’ investment in New Zealand. Rayonier has agreed to provide equity, at NAV, to replace loans outstanding under Matariki’s debt facility. Matariki was the fund’s worst performing investment in the period (off 15.8%) but most of that relates to fx moves. The plantation is affected by weak Chinese demand for timber however.
Phaunos has also cut overheads, shutting their Boston office for instance.
PTF : Phaunos Timber hurt by strong dollar but becoming more profitable