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Company Information for Sino-Forest Corporation
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Company Statement
As a leading, foreign-owned, commercial forestry operator in China, Sino-Forest operates in ten key provinces in China, with over 1,000 full-time employees, managing approximately 352,000 hectares of plantation trees as at December 31, 2006. We continuously increase our plantation portfolio, our plantation yield and our range of forest products and services, while preserving local ecological environments and supporting local employment and community development.
We are uniquely positioned to reap value from China’s vast market potential. The enormous population and the fast-growing economy and middle class of the People’s Republic of China (PRC) are creating strong demand for industrial and consumer wood-based products. We believe that we have the competitive advantages and proven strategies to reach our bold but realistic goals for the future.
Sino-Forest Operations
In order to serve China's various wood-based industries, Sino-Forest provides value added forestry products and services along the wood product supply chain.
Our businesses are separated into two main divisions:
Wood Fibre Operations, where revenue and fibre are generated from the following segments:
- Standing timber
- Wood chips and logs
- Imported wood products
Manufacturing & Other Operations, consist of:
- Particleboard production
- Engineering wood flooring
- Oriented strand board
- Nursery and greenery services
Our Strategic Goal
At our Annual Shareholders Meeting held in June 2006, Sino-Forest’s management unveiled its primary strategic goal for the next three to five years: to increase our wood fibre output from 8 million cubic meters m3 to 15-20 million m3. This goal is challenging but realistic, given our proven track record and competitive strengths.
Our Strategies
Our twelve-year track record demonstrates our successful strategy of building up a strong, viable business. In order to achieve our long-term goals, we must be at the forefront of our industry – moving into inner and northern PRC Provinces to lock in strategic locations and seize opportunities for diversification and growth. We have developed the following strategies:
- focus on acquiring additional forestry plantation trees and access to long-term supply of wood fibre in promising Chinese markets;
- continue to improve the yields at our plantations by investing in research and development;
- practice sustainable forestry management;
- leverage on our manufacturing and processing facilities to maximize the usage and value of our wood fibre;
- and further broaden our base of investors, and enhance our corporate image and profile.
Our Competitive Advantages
Sino-Forest has developed the following competitive advantages
- our leading market position as a foreign-owned, commercial plantation operator in the PRC;
- plantations strategically located, mainly in southern China;
- extensive forestry and management expertise; e.g. the Gaoyao plantation in Guangdong Province first Forest Stewardship Council Certification (FSC) for a commercial plantation;
- strong research and development expertise, and systematically applies silviculture techniques to maximize annual yield at its plantations;
- and strong brand and reputation, established relationships with local forestry bureaus and local communities in the PRC.
Company Diagram
Interior view of Sino-Forest's engineered wood flooring facility in Suzhou, PRC
Current Operations
Sales of standing timber, whereby trees are harvested by the purchasers within a certain period of time, are the fastest growing segment of Sino-Forest revenues.
As of December 31, 2006, Sino-Forest has 352,000 hectares of plantation land under management, on which it owns a mixture of mature and premature trees, in either “planted" or “purchased" plantations, including the Heyuan Undertaking.
Plantation Strategy
After establishing a strong foothold and leadership position in the southern provinces of China, Sino-Forest is working toward expanding and diversifying its plantation portfolio by pursuing tree acquisitions in the inner and northern regions of China
as the theme of our 2005 annual report suggests, we are “breaking new ground" This strategy is aligned with China’s 11th Five-year Plan whereby the central government has pledged to reduce poverty in rural areas and improve community livelihoods by accelerating regional economic development, and increasing the country’s forestry coverage.
Sino-Forest’s strategic game plan for the next 3 to 5 years is as follows.
In the short term, we plan to expand our forested area under management through acquisition. This will give us a critical mass of trees and diversify our plantation geographically where we can obtain wood fibre at attractive economic returns and help develop regional markets for forest product.
In the medium term (in five years or less), we plan to create wood baskets in several regional markets, allowing us to supply 15 to 20 million m3 of wood fibre annually. Re-planting will occur when the land-lease terms are optimal, thus bringing margins at planted-tree plantations on par or above those at purchased-tree plantations.
In the longer term, our goal is to have a sustainable supply of wood fibre from various sources including our planted-tree plantations, whereby we will obtain a significantly higher annual yield, from our managed plantations/forests with FSC certifications ?thus confirming our leadership position and expertise in the sustainable forestry plantation industry.
Wood Chips and Logs
Wood chips and logs are sourced domestically by Sino-Forest and then processed by our authorized intermediaries (AI). This segment falls under our Wood Fibre Operations. Sales volume declined during 2006 for two reasons. Firstly, in the fourth quarter of 2005, one of the two authorized intermediaries that we partnered with was privatized and ceased to provide wood chipping services to Sino-Forest. Secondly, in the further quarter of 2006, the volume of wood chips processed by the remaining authorized intermediary decreased as the wood chipping capacity was not available to us. Management is of the view that the wood chip revenue will continue to decline over the next few quarters if we are not able to access to the wood chipping capacity. We still retain the ability to acquire the same volume of fibre that was previously processed into wood chips and we plan to utilize the fibre in our own manufacturing facilities in the future.
Imported Logs
Sino-Forest is involved in the sales of large-diameter logs and other wood-based products such as veneer and sawn timber sourced from overseas countries and sold to wood dealers primarily in China.
Manufacturing and Other Operations
Sino-Forest is creating synergy between its Wood Fibre Operations and Manufacturing & Other Operations by locking in access to plantation trees through acquisition and by creating regional wood baskets in the inner and northern provinces and in the process maximising the usage and value of wood fibre harvested.
Particleboard Manufacturing in Gaoyao, Guangdong Province
Sino-Forest is currently expanding the production facility in Gaoyao, Guangdong Province, which will increase its particleboard line capacity to 275,000 m3 and its melamine lamination line capacity to 6.4 million m2. We anticipate the expansions to be completed for full commercial production in 2007.
Oriented Strand Board in Muling City, Heilongjiang Province
Although it is widely used in other countries as structural panel for houses, building materials, flooring for containers and packaging for export purposes, oriented stand board (OSB) is a relatively new product in the PRC. Sino-Forest’s OSB facility is strategically located in northern China, close to the border with Russia, where there is abundant and relatively cheaper supply of wood fibre. The annual capacity of the facility is currently 12,000 m3.
Engineered Wood Flooring in Suzhou, Jiangsu Province
As China’s GDP and average household earnings continue to grow, allowing more middle- and high-income consumers to furnish apartments, Sino-Forest is well positioned to capture potentially huge domestic demand for flooring products. Our flooring business was established in 2004, and since then, over 100 retail stores in the PRC have been selling our high-density, quality, engineered wood flooring. We are investing US$15 million to build a flooring manufacturing line in Suzhou with a capacity of 8 million m2 to be built in two phases. The first phase began operation in the third quarter of 2006. The second phase is scheduled to be built in 2007, subject to production utilization and profitability of the first phase.
Greenery and Nurseries in Suzhou, Greater Shanghai
According to China’s State Forestry Administration, there is a lack of forestation in the country, and six major cities, including Beijing, Shanghai and Guangzhou, have been identified among the ten most polluted in the world. In order to counteract these problems, the PRC government has called for the improvement of air quality and city landscaping through the planting of trees in green belts along city borders, along roads and streets, and in parks. Seeing the need to improve the gap between landscape management and supply of tree nursery products, Sino-Forest decided to pursue opportunities in this forest product business segment. With our plantation resources and expertise, we established Sinowin Plantings (Suzhou) Co. Ltd. to source, supply and manage landscaping products for property developers and other organizations.
Geographical Spread
SINO-FOREST PLANTATION BREAKDOWN
Hectares as of December 31, 2006 : 352 000 hectares.
Pre-mature trees: 250,000 hectares (71%).
Mature trees: 102,000 hectares (29%).
Board of Directors and Key Management
| Allen T.Y. Chan | Chairman and Chief Executive Officer, Hong Kong |
| Kai Kit (K.K.) Poon | President, Hong Kong |
| David J. Horsley CA, CBV | Senior Vice President and Chief Financial Officer, Toronto |
Company Address90 Burnhamthorpe Road West
|
Additional Address/Key ContactExecutive Head Office |
Most Recent Statement
20/09/07 - Sino-Forest Corporation Addresses Increased Share Trading Activity20/08/07 - Sino-Forest Appoints Peter Wang to Board of Directors
12/08/07 - Sino-Forest Increases Net Income 74% and EPS 44% in Second Quarter 2007
22/07/07 - Sino-Forest Participates in Development of Forest-derived Biofuels
11/06/07 - SINO-FOREST CORPORATION COMPLETES $201,135,000 PUBLIC OFFERING
27/05/07 - Annual and Special Meeting of Shareholders