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TFS sandalwood operations profitable

TFS Corporation Ltd owner and manager of Indian sandalwood plantations in northern Australia announced its earning outlook to the Australian Stock Exchange. Source: Timberbiz

Total sales of 1614 hectares were achieved for FY13 an increase of 132% on FY12 (693 hectares). The company said the sales result was an excellent outcome given the business interruptions caused by some minority shareholders in the first half of FY13.

As advised at the end of May 2013, the company said it remained on track to achieve a full year cash income before interest and taxes and depreciation and amortization (EBITDA) of at least $35m.

This news comes as TFS continues to prepare itself for the commencement of its first commercial sandalwood harvest during the first half of FY14.

This significant milestone will provide the market with proof of concept and the company’s board is confident that the pricing achieved by investors for their timber will exceed the original prospectus forecast.

The board expects investors will receive a positive investment return notwithstanding the poor overall quality and survival rate of this first plantation.

According to TFS the quality and survival rates in all subsequent plantations were vastly superior to the initial plantation, which consisted of only 140 hectares out of an overall estate of approximately 7600 hectares.

In preparation for the first harvest, TFS purchased a small private sandalwood plantation that was used as a harvest experiment. During this trial the R&D team in conjunction with operations established its harvesting practices.

Time has been spent in researching the most suitable equipment to assist with the mechanical aspects of the harvest. Approximately $600k in CAPEX will be invested in equipment for use in the harvest and primary processing centre, which will be located in Kununurra, Western Australia.

TFS was founded in 1997 to exploit the success of government trials into the plantation growth of Indian sandalwood in the Ord River Irrigation Area (ORIA) of north-east Western Australia.

TFS’s first planting was in 1999 and it now manages the largest area of Indian sandalwood plantations in the world, with approximately 7600 hectares planted of which TFS owns directly and indirectly approximately 2300 hectares.

TFS plantations are managed on behalf of both retail and institutional investors and it will be commencing the first commercial harvest of its Indian sandalwood plantations in 2013.