When we agreed to meet for this conversation, you said you wanted to tell us about and introduce a new company in the industry, one that brings together people who are young but who know the sector well enough.
Exactly so – the company “Timbro” started work in May 2024, and there are three of us as co-owners. We are mainly engaged in logging, timber trading, property acquisition and restructuring. We describe ourselves as a forestry and technology company.
“Timbro” has literally just acquired two thirds of SIA “Selko”, a logging company from Jēkabpils that has just turned 30; two of “Selko”’s three shareholders, who had worked in the company since it was founded, decided to take a well-earned retirement.
We have bought several timber lorries and units of forestry machinery so that we can start harvesting with our own equipment in the near future. At present we use other companies’ services for logging. The acquisition of “Selko” will help us solve technical questions, because the company owns several units of forestry machinery as well as a number of timber lorries.
For three co-owners, even with good experience and knowledge of the forestry sector, isn’t it risky to start something from scratch right now, given geopolitics, the European Green Deal and various other currents in Europe? Looking at it globally too – at the recent Global Wood Summit in Canada, for example, a timber shortage was forecast for the near future.
A forest – whether as a property, as a factory that produces timber, or as a warehouse that stores it – is not an infinite resource. Latvia is one of the most heavily forested countries in Europe. Timber is and will remain a green resource. If we look at the wood industry in Latvia, we produce raw materials, finished houses and structures, and materials that are also used in tankers and in the trim of Mercedes cars. The market is developing, and I think the potential for using timber will only keep growing – and so will the value of forests. My forecast is that consolidation of the forest property market in Latvia will continue for another ten years or so, though it certainly will not be absolute, because not every Latvian will want to sell a family property or forest to somebody else. In my view, it should be stressed that privately owned forests here are not managed well enough to deliver the maximum biological and economic benefit. The reasons for the lack of good-quality property management are very varied. For the most part the market works like this – there is a forest owner who decides to have their property harvested, they sell it or put it up for auction, somebody harvests it, and that is that. If an owner wants to approach the forest differently, wants to tend it, to go on growing it, is thinking about changing species and so on, the chances of entrusting that work to someone else are considerably slimmer – so, as it were, you have to get down to the job yourself, and that demands serious study and specific knowledge.
If we look at the market as a whole, it is developing; as a country and as an industry we are heading in the right direction in the wood processing sector. I consider “Latvijas Finieris” to be one of the leaders and good examples when it comes to the diversity of our wood industry’s products. As for “Timbro”, I am convinced that we have entered the market and the wider circulation at the right time. Beyond previous experience and knowledge, there is also the network of colleagues and partners – the sort I have built up, for instance, working in the industry since 2017; my partners and co-owners Jānis and Kristaps, who worked in the family business for six to eight years, have both experience and a circle of potential partners. The industry is dynamic and demands considerable investment. That is why entering it rapidly would not have been possible without a good financial investor. A financial investor brings funding and a very strong support team of specialists dealing with financial structuring and data analysis; the investor’s representatives take quite an active part in our work. Taking it all together and trying to give you a short answer – we have a good starter kit.
Does the company own any forest properties?
Forest properties are a separate story, and one where we see a certain potential. At the moment the market in this area is consolidating; everyone can see that. There are funds investing in properties, and there are companies that want to secure their supply chains and are building up their own forest property portfolios. I think that in the near future we will become a company of a similar kind; that is the direction we are moving in.
Talking to colleagues in the industry, I get the impression that the sector, with a few exceptions, operates very much on a regional basis.
The regional attachment has developed historically. It is well known that, for example, for a businessman from Latgale or Vidzeme, working in Kurzeme has always been something of a professional challenge. I would say, though, that this phase is over – plenty of Kurzeme people, for instance, are now working in both Latgale and Vidzeme. The situation is changing. “Timbro” has no such regional boundaries; we are already present in Vidzeme, Latgale and Sēlija. Judging by our harvesting volumes, we can speak of all the regions.
On the subject of regionality, I would add that we have no plans to throw ourselves into competition with local players; instead there are many different services we can offer, such as timber financing, wholesale and so on. I think it is better to choose cooperation over competition.
Could you explain the term “financing timber”?
Financing timber – we pay for wood that somebody will deliver to us in the future. It happens that buying a single felling site can cost a small or medium-sized company a fairly hefty sum (100,000 euros, for example), but to keep the company working for the foreseeable future several such sites are needed. The offer is there, but working capital is lacking. In such a case we are ready to step in; our interest is that the entrepreneur then sells the timber on “through us”. Naturally, all the terms and conditions – how it will all work – are set out in the contract.
In Latvia and elsewhere in Europe there is a great deal of talk about afforesting unused land. The practical side is discussed far more quietly... Does the company have plans of this kind too?
You are probably thinking of the so-called carbon economy, or CO₂ credits, as we know them better. As is well known, this sector is already at a reasonably advanced stage of development. Within a couple of years the European Union (EU) should have legislation on how it will view and assess this and how it will fit into the EU emissions trading system. All of that is in progress.
I would add that three or four years ago, when I started talking about this, I was considered a bit mad; our Estonian colleagues fared much the same, though they were even madder and there were more of them. At present several companies are active in this field and providing services, their number will certainly grow, and faster development can be expected.
Within the company we have looked at and assessed not only afforestation but also the creation of wetlands (rewetting), because a harvested peat bog emits carbon, whereas if the water level is raised a little and a certain vegetation develops, emissions fall and the site can eventually become a CO₂ absorber... That is, understandably, a more complicated project than afforestation, but it is nonetheless perfectly comprehensible.
As I have already said, this kind of economy is developing, and we would very much like to be part of it...
Carbon credits are something that, in my view, is explained in an unnecessarily complicated way even to industry professionals.
My answer certainly will not satisfy you, but questions about carbon credits are explained in a complicated way because they are, in essence, not simple. The standards that form the legal and practical framework of the system are quite complex, yet the process itself is very simple.
For instance, the two of us, you and I, have carried out some measure that reduces the amount of carbon in the atmosphere – there are variants: either it reduces emissions or it captures carbon from the atmosphere. Our action has created a certain situation X (had we not acted as we did, X would not exist). In the case of carbon credits, this X turns into tangible money. There is another side to it – through the Taxonomy Regulation, the EU will create demand for these credits in more and more sectors, because businesses are required to reduce their CO₂ emissions. If reducing them in practice proves difficult, they can be offset. That would be the short version, but the issue – as I said – is very complex.
The land and forest market. Talking to colleagues in the industry, their views on the forest property market vary enormously. One says the market is stagnating, another that it is moving slowly, a third that everything is happening. The market in Latvia is fairly compact, so why such differing views?
There are various aspects to it. One is timber prices, which are an important component of the forest property market. The property market is “on the move” – there are long-term investors, there are capital investors... The market has never stopped; the only question is the price. Experience shows that, whether we are talking about forest property or about timber, we are at the so-called spot price. The market depends to a large extent on demand, which also affects property prices. Of course, it would be more pleasant if the market were more stable.
For some time now people have been saying, and assessing, that the regulations and legislation affecting the forestry sector are quite contradictory. Is Latvia successfully coping with these contradictions?
In my view it is important to understand that there are really not that many of the so-called big, very important questions here; one of them (the “hottest”) is nature conservation (the issue being which areas ought to be protected). As we know, the state “takes on” a large part of this burden, and the private sector will have to shoulder some of it too. The problem is that compensation is a matter for each country, and in Latvia the budget priorities are certainly defence, doctors and teachers.
On the subject of contradictions, I would add that I cannot understand a situation in which wood chips as an energy feedstock are assessed as “less green” than natural gas. Gas is a fossil resource that emits CO₂. I accept that it is hard to reconcile everything at EU level and that contradictions are possible. A company’s day-to-day work, though, is much, much more practical.
A little about acquiring a stake in the company “Selko” in Jēkabpils, which you mentioned earlier – how does that come about: were you looking, or did they find you?
The process, if I can put it that way, goes on day in, day out. As you work, talk and meet people from the industry, you have to keep your eyes and ears open. We make no secret of the fact that we plan to grow, and one way of growing is to find local companies we can acquire. This is the 35th year since the restoration of Latvia’s independence, and the industry is the same age; there are entrepreneurs who started a third of a century ago and now want to enjoy the fruits of their work differently, while at the same time wanting to see the further development of what they built. That is a great opportunity to sit down, talk and find common ground. We plan to develop “Selko” as a company; it will be part of “Timbro Group”, and we will carry on what the Jēkabpils people began. As I mentioned, we are also a technology company and we can make many everyday things simpler and easier. It will not happen too quickly, but we have set out on that path. We take the same view of any region of Latvia and will plan our development accordingly.
In Vidzeme people used to talk about the region’s powerful golden triangle – Cēsis, Smiltene, Valmiera – and it seems Sigulda should not be forgotten either...
If someone wants to work in or move to a small, wonderful town with an outstanding environment and raise their children there, Cēsis is a very good choice. I have returned to my home town myself. The days when salaries and the geographical distance between towns really mattered are over.
In my view there are few companies in the industry whose core is a team, which at “Timbro” is a very, very – indeed extremely – important thing. Yes, there are companies with two or three partners (co-owners), but there are not many; for the most part, many would have to be described as one person’s story – the story of the person who took the company to success. Five months ago there were the three of us and a bookkeeper. Now there are already 20 of us... Counting “Selko” – 70. By the end of the year I think another five to ten employees will join our team.
Before we came together in this line-up and agreed on the way forward, I had the chance to run a small logging company; that gave me excellent experience both in the work itself and in understanding what the daily round of a small business is like – one moment you are the office clerk, the next the bookkeeper, and also the buyer and ... the solver of all manner of problems. Looking back, I conclude that if I had had even part of the technological solutions we are preparing to offer our partners, it would have made my life very, very much easier and saved time for productive things. It was in this connection that I got to know the brothers Jānis and Kristaps Stūriška, because I had concluded that a small company cannot organise the sale of timber. We found a like-minded investor.
About the team – do you mean the management team, or all the company’s employees as a single team?
If the management team has healthy relationships and a healthy way of resolving conflicts (there are and always will be problems, both in the industry and in business, and there is no shortage of them), if you can sit down at the table straight away, talk things through and find a solution to the problem or question, then things are good. As soon as problems are swept under the carpet, or one of the team members suddenly develops different plans or ambitions, it can lead to a sorry state of affairs.
From the way you tell it, one can sense that you are happy and proud to be living in Cēsis again.
In Cēsis you can see very clearly how the movement of people has turned in the direction away from Rīga. I remember the 1990s, when there was a great deal of activity in this part of the country, and now that feeling has returned. Of course there are various reasons for it – far more people drive, for instance, and it is possible to travel better and faster. I myself try to go to Rīga no more than once a week, or even less often; the capital creates a certain sense of anxiety and wastes time. If there are children in the family, many things in Rīga are complicated, unless you are lucky and live next to your workplace.
In Cēsis it is hard to imagine a journey from one place to another taking more than five minutes. My children have been going to school and to their clubs on their own since their first year at school. Someone should ask people in Rīga how regularly they or their children go to downhill skiing training, for example. Around Cēsis there are plenty of walking trails, and we have the Gauja.
As someone from Cēsis, it matters to me that a good and successful business environment develops in my town, one that will certainly need employees – we will too – and perhaps one of our future colleagues will first find a job here and later look for a way to live here.
To close, I would add that this summer we listened to an interview with Andris Ramoliņš on Youtube in which he made a qualified reproach to the industry’s younger generation, saying he could not feel their breath on the back of his neck. We heard that call...