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Tornator is changing the valuation method for its Finnish forests - the change is estimated to have a significant positive impact on the value of forest assets
Tornator Oyj Stock Exchange Release, 23 November at 09.00 AM EET
Inside information
Tornator is changing the valuation method for its Finnish forests - the change is estimated to have a significant positive impact on the value of forest assets
The fair value (IFRS) of Tornator Oyj's Finnish forests will increase significantly in the 2022 financial statements, when the company changes its valuation method for Finnish forests and adopts a valuation method based on market transaction prices. In the new valuation method, the value of the company's forest assets is determined based on regionally calculated prices from actual forest land transactions. Valued forest assets include standing stock (trees) and land. Simultaneously, Tornator changes its accounting principle for the land from acquisition cost method to the revaluation method in all operating countries. According to Tornator's view, the market transaction information obtained from the Finnish forestland transactions is reliable and gives a better and more transparent view of the current value of the company's forests in Finland than the current method based on the net present value of cash flows.
The change is estimated to have a significant positive impact on the fair value of Tornator’s Finnish forest assets. According to preliminary estimates, the fair value of Finnish forest assets in the 31 December 2021 financial statements determined using the market transaction price method would have been approximately EUR 500-600 million higher than the total value of standing stock and land reported in the 31 December 2021 financial statements, which was approximately EUR 2.1 billion. The positive change in value is proportionally more to the value of the land than of the standing stock.
The update of the fair value of Finnish forests will be completed for 31 December 2022 Financial Statements, and it will also take into account the latest market transactions of 2022. Regarding the change in the fair value of standing stock, there will be no changes in the accounting treatment, but the change in fair value of biological assets will continue to be presented in the income statement. Regarding land, the difference between the acquisition cost and fair value calculated according to the revaluation method, net of deferred tax effect, is reported in other comprehensive income.
The increase in the fair value of Tornator’s Finnish forests will significantly improve the 2022 result measured at fair value, but it will not have a cash flow effect in 2022.
The change in the valuation method only applies to the value of forests reported in the IFRS financial statements. Tornator's Finnish forests are to a high degree pledged as security for the company's interest-bearing debts, and the calculation of the security asset value of Finnish forests remains essentially unchanged in accordance with the Intercreditor Agreement. The collateral value of Finnish forests continues to be determined using the discounted cash flow method and is based on a valuation made by an external appraiser, Indufor Oy.
For further information, please contact:
CEO Henrik Nieminen, tel. +358 40 869 7613
CFO Antti Siirtola, tel. +358 40 773 0975
Tornator is a leading specialist in sustainable forestry in Europe. It owns forests in Finland, Estonia and Romania. In 2021, the group’s net sales were some €129 million, and the balance sheet value was about €2.4 billion. The group has around 190 employees. Tornator's own employees, and other companies and their employees working on its forestland, add up to around 1,000 person/years of employment. The owners of the parent company are Finnish, mainly institutional investors. Tornator's mission is to generate sustainable well-being from forests.
