Forest Forecast tool gives security in forest investments
“One of the key elements of the strategy that Skogssällskapet put together for me is that the forestry will always cover the costs, including those for the most long-term activities. Short-term profit is not a priority – what I’m after is a continual growth in values, both forest and financial,” says Kjell Öberg.
With 20 years’ experience of working with start-ups and business development, Kjell Öberg is no stranger to offensive and long-term investments. His consulting business is primarily focused on innovation companies in the fields of environmental and medical technology. Often, his work involves commercialising research results and technology platforms based on academic research, but when it comes to private investments in forest, Kjell had no corresponding specialist expertise to fall back on.
“When I started to look for a suitable forest property, I had no experience of forestry whatsoever, but my work with business development had taught me the importance of working with people who have the right expertise.”
After discussions with several forest actors, Kjell decided on Skogssällskapet. “What I was particularly struck by was their focus on adaptation to goals, that my own goals would steer the activities they carry out,” says Kjell.
Goal: a holding of 1000 hectares
Kjell purchased his first forest holding in 2013, a property of around 90 hectares situated in the municipality of Vilhelmina, about 200 km northwest of Umeå. Kjell, who grew up in Piteå, wanted to buy land ‘upwards and inwards’ where buyers get more forest for their money. His start-up capital was limited, so this strategy suited him best.
“Already at our first meeting with Kjell, he told us his goal – to build up a forest holding of 1000 hectares. That’s quite an unusual goal for someone completely new to owning forest, but within a couple of years he’d bought another property of some 270 hectares in Vilhelmina,” says David Israelsson, forest manager at Skogssällskapet and Kjell’s point of contact since the start.
Forest Forecasting tool (Skogsprognos®) limits business risk
The purchases have largely been financed through bank loans, but Kjell is convinced that his investments will be profitable in the long term.
“Swedish forest is a resource whose value will continue to increase. If Sweden is to become free of fossil fuels, we must use the forest more than we do today. The prices of forest raw materials will then probably drift upwards and stabilise at a higher level because of growing demand from more and new actors. The business risk that a forest purchase entails can be limited if you first carry out a Forest Forecast and carefully plan the financial aspects in terms of repayments, cash flows, and so on,” says Kjell.
Analysis forecasts profitability
In autumn 2017, Kjell took another big step by buying a property of some 540 hectares. This brings him closer to his 1000-hectare goal, at least in terms of land area. However, if only productive forest land is included, as Kjell does, his current total is around 560 hectares.
This purchase was also preceded by a Forest Forecast, to see how the forest would fit in with his existing strategy. Here, David as forest manager gets help from Skogssällskapet’s forest analysts and economists. The aims are to calculate profitability and to assess how well the purchase fits into the overall objective, in terms of tree species distribution, distribution by age, etc.
“In this case, the outcome was very positive, and showed that the purchase would ensure that the standing volume would continue to increase for the foreseeable future. If Kjell continues with his sustainable approach to forestry, this investment will meet his requirements for return,” says David Israelsson.
Updated Forest Strategy (Skogsstrategi®)
The latest forest purchase has now been incorporated in the Forest Strategy for Kjell’s total forest holding. The updated strategy makes a priority of switching from spruce to pine on selected parts of the holding, to take full advantage of the land’s production capacity.
Financially, the initial focus is on paying off existing loans to create capacity for further forest purchases.
“The plan is to buy more land and increase the forest holding. The idea is that my children, if they want to, will be able to take over a well-established and well-developed forest holding. Although I’m only 50, it can still be a good idea to think a bit about the future and an intergenerational transfer. Perhaps when I’m retired, I might want to keep a small part of the forest to run as a hobby, while we own most of it together,” says Kjell.
Father would be happy
Creating a forest holding that can offer security for future generations has always been Kjell’s ambition.
“My father loved the forest, and started to train to become a forester. Sadly, he hurt himself badly in a sporting accident and had to drop out of that programme, and went into teaching instead. I know he’d be really glad to know that his dreams of having a family forestry business are now becoming reality.
“Of course, I’m happy, and also quite proud, but without the support of David and his colleagues at Skogssällskapet, we’d never have come this far. All credit to them for what they’ve done,” adds Kjell Öberg, doctor of chemistry, successful business consultant, and now also a significant forest owner in the municipality of Vilhelmina.
TEXT: ANDERS THORÉN
Forest Strategy (Skogsstrategi®) and Forest Forecast (Skogsprognos®)
Is our forestry sustainable? What will our forest be like when the children take over? How much money can I get from the forest when I retire? These are just some of the questions we know that forest owners ask, and we have the answer: the Forest Strategy. Read more about Forest Strategy.
Have you decided to invest in a forest property? Maybe you want to take over the family farm, or buy a property on the open market? If so, the next thing to consider is how to finance the project, and what the calculations for the future are like. A Forest Forecast (Skogsprognos®) gives you the answers to a number of important questions. Read more about Forest Forecast.