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IQ Business

Executive Summary
Production and sales of solid wooden
boards

CEO Andrey Kharchenko


Business-analyst Anton Sukhanov
Business-analyst Alexander Skobarev

Т.: +7(391) 2978445


E.: info@iq-b2b.ru
iqbusiness@yandex.ru
А.: Krasnoyarsk, 15 Baturina st.
www.iq-b2b.ru

Krasnoyarsk, 2009. Copyright IQ BUSINESS

1. Company profile
EXECUTIVE SUMMARY
2009
The company specializes in production of solid wooden boards made of Angarsk pine 1. The
company is located in Krasnoyarsk. Long-term contracts with large timber enterprises secure
stable supplies of round wood for the whole year regardless of weather conditions. Efficient
operations provide the company an ability to promptly produce and deliver wooden boards at the
order of a customer.

Project output - 500 m3/month


Average production volume – 350 m3/month
Enterprise maturity – 2 years
Personnel employed– 100
Corporate form – OOO (LLC)
Equipment - «Weinig AG» (2006)
Production yard – 2500
Ground is rented for 49 years
Equity capital is divided between share holders in following proportion:
90% - private owner,
10% - corporate owner.
Table 1 – SWOT analysis

Opportunities Threats
Internal origin

Stable, experienced team


Up-to-date equipment Nonoptimal business processes
Transparent business model Lack of owned timber sources
Increase in the enterprise output
External origin

Target market growth Decrease in aggregate consumption


Demand for deep processing of Entrance of new competitors
round wood

2. The following statements characterize growth potential of Krasnoyarsk region timber


industry:
- Forests occupy 69% of Krasnoyarsk region territory.
- Krasnoyarsk region forests are the largest (7.8 billion m3) source of timber in Russia.
- Volume of lumbering is app. 8.9 mil. m3, which is 14.9% of prescribed cut.
- Timber production output is app. €160 000 000, which is 2.8% of Russian timber
industry production volume.
- Main factors which make possible the boost of timber production volume are: excess of
timber recourses, production potential and availability of qualified stuff.
- Principal product of Krasnoyarsk timber industry is round wood.
- The most prospective vector of the industry development is intensification of timber
processing.

1
Angarsk pine provides high quality timber, which is valued for its good density.
EXECUTIVE SUMMARY
2009
- Increase in round wood export tax from 25 to 80 percent (expected in 01.01.2010) will
likely stimulate demand for intensive processing of timber.
- Production volume of Russian timber industry decreased by 15% during the first quarter
of 2009.

3. Product characteristics

Solid wooden board is natural, ecologically clean product of wood deep processing. It is used for
production of following goods:
- ladders,
- furniture panels,
- table tops,
- decorative panels and elements,
- parquet,
- windowsills,
- doors and etc.

Advantages of the wooden board over any other materials used in furniture production are these:
- Due to several specialties of production process solid wooden boards become resistant to
deformation, cracking and drying shrinkage;
- Solid wooden boards preserve natural texture of wood surface;
- Wooden boards are ecologically clean which enables their use in furniture and interior
elements production;
- The level of quality of the wooden boards is excepted in the EU;
- Overall size of wooden board can be varied easily depending on customers requirements;
- Furniture made of wooden boards can regulate air humidity indoors; it is safer and more
durable than furniture made of chipboard.

Owing to described features demand for solid wooden board tends to be high both on
Russian and international market

4. Business model

Diagram 1– Cost structure, rubles per 1 m3 of wooden board

According to the diagramm, the prime cost of 1 m3 production is $560.

At present delivey agreements are concluded with companies from following regions:
EXECUTIVE SUMMARY
2009
- Tyumen
- Moscow
- Ivanovo
- Murom
- Barnaul

The company exports wooden boards to:


- Hungary
- Ukraine
- Kazahstan

The average delivery price of 1 m3 is $755. Thus when month output is 350 m3 EBIT is $68 460
per month.

5. Team

Management of the company has seccessful experience in doing business in timber industry.
Senior managers are people of many accomplishments. The company also employs the most
qualified workers in the city.

6. Transaction conditions

Estimated price of the company is $5 800 000. It is also possible to join the company with some
timber enterprise which owns recourses of round wood. As a result of this consolidation the
following synergy effects would arise:
- Decrease in production cost owing to vertical integration of business;
- Scale economy effect;
- Strengthening of market position
- Decrease in borrowed capital cost.

Price of consolidated enterprise is $6 770 000

At present we observe a tendency for consolidation of assets in wood industry. In the future this
trend may provide an investor with a possibility to advantageously sell the company to a
competitor, or expand the market share by acquisition of other prospective enterprises.

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