"When you need to acquire that much capital, it’s nice not to have to explain what kind of business you run." says Ingvar Klasson, a forestry contractor who, in four years, has tripled his business in this capital intensive industry.
After weeks of February darkness, warm and pale sunlight finally shines through the woods around the small village of Enhörna, in Sörmland, Sweden. But the air is cold and the ground is still frozen. Klasson seems pleased.
“This is exactly how it should be. Sun, cold and just a little snow,” he says, as he climbs up into his yellow, Finnish-made, PONSSE Gazelle forwarder.
Ingvar Klasson is a typical hands-on forestry contractor. His company turns a solid profit, but sales are relatively small compared to the capital tied up in his machinery. He started work early this morning. At midday, his replacement arrives for the second shift that will last until 9 p.m. “It is hard work to turn a profit. Working shifts gives better margins,” says Klasson.
The forest industry is recovering in many countries, like Sweden. In spite of a reduced demand for newspaper pulp, the need for cardboard and sawn timber is currently growing. Klasson has developed from a one man operation four years ago into a four man team with three forwarders. “Landowners today want to minimize soil damage. My little machines trample the ground a lot less than the gigantic machines others use. Furthermore, we are certified according to PEFC certification* for sustainable forest management,” says Klasson. And certified timber commands premium prices.
*A requirement for forest owners who want to sell certified wood at premium prices.
Growth is an expensive proposition for a forest contractor. Klasson’s three Gazelles represent an investment of between SEK 7-8 million. He uses them for a year or two before he sells them to buy new machines. “Standing still is expensive and customers become dissatisfied if I do not show up when I promise,” says Klasson, whose last eight machines were purchased with funding from PONSSE Finance, a cooperation between PONSSE and DLL.
DLL has for many years had a separate business area focused on investments in Swedish base industries such as forestry. Among other ventures, the group provides financing to PONSSE customers through PONSSE Finance. This kind of involvement requires knowledge of both the industry and its players to provide fair loan conditions.
“Like so many other industries, the forest industry has special needs and conditions. We work with many companies in the industry and keep an eye out for both market risks and trends in our analyses. This is a prerequisite for being able to offer good conditions and low interest rates,” says Mathias Räf, Senior Account Manager DLL.