Armands Apfelbaums, co-owner of “ACA Timber”, in conversation with Māris Liopa, chairman of the Forest Certification Council of Latvia, and Pauls Rēvelis, editor of zemeunvalsts.lv

Before we turn to the main question – namely, as reported earlier, “ACA Timber” has acquired “Metsä Forest Latvia” – please tell us briefly how your path in the industry began. As we know, you are also a graduate of the LLU Faculty of Forestry in Jelgava.

That's right, but as for the “very beginning” in business, I would definitely point to “Latvijas Finieris”, where I started work two weeks after finishing my studies. It was a very good school and a strong push for everything that followed. The ink on my diploma had not yet dried when I set to work at “Latvijas Finieris”. I should add that in my immediate circle I had no family background connected with forestry, nor any people connected with the forest. I went to see Juris Biķis, then head of “Latvijas Finieris”, and was given a trial assignment – a market study to be completed within two months; I handled it successfully and was taken on.

The time I spent at “Latvijas Finieris” was interesting, instructive and also demanding, and it passed in the company of very pleasant colleagues. The beginning was interesting in many respects – for example, at “Latvijas bērzs” in Sarkandaugava I saw a wagon that had travelled from Siberia, loaded by prisoners, carrying birches of enormous diameter. As we know, a great deal of timber was sent to Latvia in Soviet times, because the local generation of foresters supported conserving the forests. Plywood production in Latvia was supplied from almost every corner of the then union; compared with today, transport was not a big problem back then, and it was quite usual to count volumes of timber in wagons as well.

After several years at “Latvijas Finieris” came the moment when I decided to set up my own private company. The first 5-6 years were hard, even gruelling; for two years I worked a great deal in logging in Russia, near the Latvian border, using my own machinery and my own employees, and alongside that I also took up timber trading and logistics services. When the company was enjoying its “golden years”, I tried to broaden the range of products I traded, adding finished goods, sawn timber and furniture blanks. On the whole the work went with varying success, until the most successful business period of my life came along – a time when many people in many places were in a serious crisis: 2008-2009. Why did things go well for me? I had bought sizeable volumes of timber in Belarus, and as prices rose sharply I sold them to the Scandinavians. In parallel I had already begun working with my current business partners – Anders Akvelin from Sweden and Claus Rodenberg from Waldkantor in Germany. In time it turned out that both partners had a shared logistics company. There followed a proposal that all three of us set up a joint company to operate in the Baltic states and Russia. Our joint work began at the start of 2010, and shortly afterwards we also founded the joint company “ACA Timber”. The explanation of the name is simple – the first letters of the three co-owners' names (Anders, Claus, Armands) and timber (timber).

You mention Russia in your account. How was your company's work affected by Russia's invasion of Ukraine? Clearly, cooperation with Russia was broken off.

I found and established my business contacts in Russia while I was working at “Latvijas Finieris”; the cooperation was extensive and long-lasting and continued until February 2022, when I ended it, and since that moment all communication has ceased as well. On a human level I was very taken aback by the fact that a war could break out in the 21st century. I have to say that in the course of my work I have travelled almost the whole of that neighbouring country and been to most of Russia's regions – Buryatia, Kamchatka, Lake Baikal, Vladivostok and Khabarovsk... I simply did not believe war was possible.

Some of my former partners have left Russia, taking the view that in that country the coming generations are already being prepared at school for war, or for a situation like the one in North Korea. At the same time they stress, incidentally, that a large proportion of Russians not only support the war but even want to fight, to gain additional territory and land, for which there is no sensible justification at all, since the country ought first to be able to cope with the territory it already has.

As for business, “switching over” from Russia to Scandinavia caused no great problems. At present the region to our east is lost in business terms. Right now, for instance, if there has been a storm in France or Sweden, I transport the timber to the Baltic states and so on. Cooperation with the part of Europe to our west has been long enough and successful, and timber is brought to Latvia from various countries. There is also a steady flow of roundwood from Norway, going back more than 10 years (a long-term contract has been concluded for 10 years with the two largest forest owners' cooperatives).

Is your work affected by so-called sanctioned timber, which supposedly comes from Kazakhstan, Kyrgyzstan, Georgia and so on, but in fact originates in Russia or Belarus?

In my work that is not important. For example, I have traded pellets in small volumes, and I see problems only in that sector. I think logistics costs matter quite a lot, because if we add it up: the material itself (timber or pellets) costs something, and the “detour” made through third and fourth countries costs almost as much again. There is no rational or profitable basis for it.

“ACA Timber” has acquired “Metsä Forest Latvia”. How did the acquisition come about? Who initiated it?

As is well known, more than one Scandinavian company has been optimising its investments abroad in recent years. Representatives of the “Metsäliitto” cooperative approached us, explaining that they were continuing to develop their strategic plan and were winding up subsidiaries in the Baltic states and in Germany. In the course of the talks there was first a proposal for cooperation, followed by a proposal to sell the company – in short, we received an offer to buy.

The offer came – what next...

The decision took almost a year, with more than six months of talks; bearing in mind that “ACA Timber” is a stable company, we judged that acquiring “Metsä Forest Latvia” would mean taking on commitments for long-term resource supply, for around 40 employees and for production processes in the forest. The deal is a step closer to the resources we need and to work in the forest, which we had not engaged in until now; in return, a certain share of resources will be guaranteed and production processes can be planned differently.

We completed the deal in full just under a month ago; time was taken up by the Competition Council, which prepared its assessment, and later, very unexpectedly and without explanation, we received a refusal from the state financial institution; that too drew the process out by a couple of weeks, and several commercial banks we had talked to “backed out”. Swedbank came to the rescue, if I may put it that way, and together we found a very good solution for financing the project.

We are now continuing to analyse and consider exactly what to do next: one option would be to merge the two companies into a single limited company at the beginning of next year, but we are still looking at which option would work out better.

To sum up – alongside timber trading, logging will now also be in your charge.

It is worth remembering that “Metsäliitto” was the first foreign-capital company (Silva) that the Scandinavians established in Latvia; it was headed at the time by Jānis Rubens, a former deputy forestry minister from the Soviet era. The company can be regarded as a fairly successful “long-liver”, but as circumstances changed a certain stagnation crept into its operations in recent years. When we received the offer mentioned above, there was interest; we discussed it with our business partners, and I have to say that among my colleagues the interest was perhaps even greater... Well, the deal has now taken place and been concluded. No very specific changes or restructuring set down on paper are being planned yet. As I mentioned, the deal has given us both production and forest regeneration – the full forest management cycle, which opens up wider opportunities for cooperation with private forest owners.

Returning to broader questions – is your work affected by the shifting tariff policy from across the ocean, one thing in the morning and another in the evening?

Partly, but I think it affects business all over the world to a greater or lesser degree. People are starting to be cautious, even fearful – wary of taking out a loan, for instance; as we know, our industry is closely tied to construction, and the fewer houses are built, the more seriously it will affect us.

You mentioned ten years of cooperation with Norway and timber imports. As we see it, Norway is a beautiful but very expensive country. Who in Latvia buys timber from there?

Yes, successful cooperation with the Norwegians has lasted more than 10 years. As I have said, when active hostilities began the flow of raw material from the east was halted. What happened? People in our industry know very well that without timber imports a wood-processing plant would have to shut down. We need imports. In Norway most of the forests are in mountainous areas. While in the 1990s the Norwegians imported timber, a different path has now been chosen, namely to use the fossil and other resources from underground that they have at their disposal; sawmilling there is not profitable enough. Norway is a significant timber exporter, which guarantees a flow of sawlogs in the long term.

Could this flow be affected by the large mills being built and already operating in Finland and Sweden?

First of all, it should be remembered that a large sawmill is due to open this year in Lithuania near Šilalė, which will reduce our opportunities to import timber from Lithuania (we import just under a million cubic metres a year from our neighbour). I think the Norwegians, who are not planning to build new sawmills, will continue to export timber.

The forest market in Latvia involves not only large transactions, such as those connected with Bergkvist and Södra, but also activity in smaller properties...

If we look at Europe as a whole, a forest market as such does exist in our region and is quite active. Why do I say that? In Germany or France, for example, there is essentially no such market: acquiring forest properties is not straightforward and such transactions happen rather rarely. Of course, forests are managed in those countries too, but there are a great many family estates there, which are the pride of the family concerned and which many heirs do not wish to sell.

Speaking of our region as a whole, after Russia's invasion of Ukraine a large proportion of investors took fright, while others hope to profit from the situation – if something can be bought, we buy it and wait for better times.

Local government elections have an impact on everyone. Will anything change in your work? Many business owners describe local authority support, or the lack of it, in very different ways.

I have to say that I have never asked anyone for anything in this regard, nor has there been any need. For my part, I would give great credit to “Latvijas valsts meži”, which for more than 20 years has done excellent work in raising the value of the forest and putting forest infrastructure in order, which is a benefit to everyone.

I am very fond of the saying that the country as a whole is whatever we are – me, you, the neighbour, an acquaintance, a friend. We have not known times as peaceful as the Swedes have, nor have we had such a long, uninterrupted period of peace as some southern European countries, and so we look at many things and judge them differently. For example, I have been to the Portuguese forest service twice and can compare it with ours: there the attitude is simple – they have no use for outsiders... If some local resident or official has not put in a good word for you at the local office, you are neither expected nor needed there, even in situations where help would genuinely be required, for example after forest fires. On other occasions and in other places in my work I have also seen the great differences between European Union countries, and that has to be taken into account.

Looking to the future, I see and know that, despite the geopolitical and other problems, Latvian entrepreneurs are looking confidently ahead and thinking about developing their companies. That, in my view, is the true, the right and the only way.