Phaunos Timber Fund reports full-year 2013 loss of US$55.4M compared with US$43.2M loss in 2012; executive chairman pledges focus on disposal of non-core assets, realizing further operating efficiencies, after 'disappointing' results

LONDON , April 23, 2014 (press release) – Phaunos Timber Fund Limited ("Phaunos" or the "Company"), the Authorised Closed ended investment scheme established to invest in timberland and timber related assets on a global basis, today issues its audited results for the year ended 31 December 2013.

Key Developments and Financial Results

  Year to 31 Dec 2013 Year to 31 Dec 2012
Net Asset Value ("NAV") US$419.0 million US$488.4 million
NAV per Ordinary Share US$0.78 US$0.91
Dividends paid US$ Nil US$13.4 million
Loss for the year US$(55.4) million US$(43.2) million
Loss per Ordinary Share (10.32) cents (8.04) cents


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

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

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

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

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

Operational Highlights:
  • As of 1 December 2013, Phaunos became a self-managed fund, having terminated its Investment Management Agreement with FourWinds Capital Management.
  • In December 2013, Stafford Timberland Limited was engaged to provide a review of the Company's timber assets. During the first quarter of 2014, Stafford toured all the properties excluding China. The results of the review are expected in mid-May.
  • U.S. and Asian timber markets continue to rebound, with our investments in those regions experiencing greater demand for logs and lumber; primarily Matariki, Aurora Forestal, and GTFF.
  • Phaunos and Rayonier integrated the Rayonier log trading business into Matariki's operations. This is expected to realise nearly US$2 million annually in additional revenue to Matariki commencing early 2014. Additional cost savings are anticipated from a recently implemented internalisation of Matariki's management.
  • In May, GTFF began supplying hybrid poplar logs to Columbia Forest Products' ("CFP") newly completed veneer mill built alongside GTFF's sawmill in Boardman, Oregon. Approximately 15% of GTFF's total annual log volume is anticipated to be sold to CFP for the making of veneer.
  • In December 2013, Eucateca began its first harvest of portions of its eucalyptus plantations in Mato Grosso. In addition, marketing for the sale of Eucateca's teak timberlands commenced in Q4 2013.
  • Mata Mineira continued its harvest operations, generating US$6.5 million (2012: US$3.9 million) of revenue, with internal dividends totalling US$4 million (2012: US$83,000) paid to Phaunos.
  • Currency fluctuations and soft timber pricing continued to put downward pressure on valuations in our Brazilian investments.
  • Wind storms during September affecting New Zealand and the United States resulted in blown down timber on 1% of Matariki and 2% of GTFF plantations. However, nearly all of this timber is being salvaged, with completion of most of the salvage operations scheduled for Q4 2014 and Q1 2014 on the respective properties.
  • The sales programme of non-core assets is continuing. In May 2013, Phaunos sold Forest Enterprises, its Serbian wood pellet mill, for US$1.6 million, while sales of plantations in Pradera Roja amounted to US$1.1 million in 2013. Additional sales of plantations are expected in 2014 for Pradera Roja and Green China.
Post year end - Board changes:
  • Following the termination of the Investment Management Agreement in December 2013, the Board commissioned an operational and strategic review of the Company. As an interim measure and until the review is complete, Sir Harry Studholme will become Executive Chairman.
  • On 17 March 2014 Richard Hills was appointed as the Senior Independent Director of Phaunos.
Sir Henry Studholme, Executive Chairman of Phaunos, commented on the results: "2013 was a difficult year for the Company, both in terms of markets where we operate and the internal challenges we faced. Despite improvements in cash flow from our harvesting assets, a continued recovery in US and Asian timber markets and the realisation of significant cost reductions, the overall results for the full year were disappointing. Currency fluctuations and soft timber pricing continued to put downward pressure on valuations in our Brazilian investments whilst reappraisals adversely affected parts of our portfolio exposed to East Africa and China. Against this backdrop, in the forthcoming year we intend to increase our focus on the disposal of non-core assets, while maximising value and realising further operating efficiencies across all our investments. I am confident that the strategic and operational review, which has already made significant progress, will provide us with the opportunity to re-position the Phaunos Timber Fund for the long-term benefit of its shareholders."

A presentation for analysts will be held at 09:00 this morning at Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, EC2M 5SY. Details for analysts unable to attend the presentation are as follows: Dial in: +44 (0) 20 3003 2666; PIN: 2016954.

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