Plantation Strategy

After establishing a strong foothold and leadership position in the southern provinces of China, Sino-Forest is working toward expanding and diversifying its plantation portfolio by pursuing tree acquisitions in that region as well as in the inner and northern regions of China. This strategy is aligned with China’s 11th Five-year Plan whereby the central government has pledged to reduce poverty in rural areas and improve community livelihoods by accelerating regional economic development, and increasing the country’s forestry coverage.

Sino-Forest’s strategic game plan for the next 3 to 5 years is as follows.

In the short term, we plan to expand our forested area under management through acquisition. This will give us a critical mass of trees and diversify our plantation geographically where we can obtain wood fibre at attractive economic returns and help develop regional markets for both upstream and downstream forest products.

In the medium term, we plan to create "wood baskets" in several regional markets, allowing us to supply 15 to 20 million m³ of wood fibre annually. Re-planting will occur after securing optimal land-lease terms, thus bringing margins at planted-tree plantations on par or above those at purchased-tree plantations.

In the longer term, our goal is to have a sustainable supply of wood fibre from various sources including our planted-tree plantations, where we will obtain a significantly higher annual yield from our managed plantations/forests with FSC certifications thus confirming our leadership position and expertise in the sustainable forestry plantation industry.

SINO-FOREST PLANTATION BREAKDOWN

Merchantable Standing Volume as at 31 December 2007

Merchantable standing volume means trees or wood fibre available  for harvest and sale to the market. Included here are plantations from Sino-Forest’s purchased-tree and planted-tree plantations, and of different species (eucalyptus, pine, chinese fir and others) and age above 4 years old.

As of December 31, 2007, Sino-Forest has 312,000 hectares of trees under management. Note the table below excludes 45,000 hectares of trees which are less than four years old (which is regarded as minimum harvestable age for trees).

View Merchantable Standing Volume Table

How We Operate

In China, plantation lands are owned by the state and are managed by the regional forestry bureaus in a wholly- or collectively-controlled manner. The forestry bureaus allocate annual logging quotas. Sino-Forest typically owns only the trees where it manages the lands at either "purchased-tree" or "planted-tree" plantations.

Since the late nineties, Sino-Forest’s plantation business has been gradually shifting from the profit sharing Cooperation Joint Venture (CJV) model to the higher-margin business of purchasing and harvesting trees at purchased plantations, with first rights to lease the underlying land long-term.

Conversion of legal structure from CJV to WFOE

In the fourth quarter of 2007, Sino-Forest completed the conversion of the legal structure of all its Co-operative Joint Venture (CJV) to Wholly Foreign Owned Enterprises (WFOE). Under the WFOE structure, Sino-Forest will have overall operational control and management rights of its plantation operations. The company will lease land from the original plantation rights holders and pay the land lease rent, which is settled mainly on a yearly basis. Terms of land lease are between 30 and 50 years, depending on the province and region. The conversion will provide Sino-Forest with better control of its plantations and generate higher margins.

Plantation Management Expertise

Sino-Forest’s advanced management practices include the use of a Sustainable Intensive Plantation Management System (SIPMS) for producing fast-growing, high-quality trees in a sustainable manner. The system uses modern techniques for raising nursery seedlings/cuttings, assessing, selecting and preparing plantation sites, improved planting materials, and increases soil productivity, clearing and terracing, planting at optimal times of the year, optimizing spacing and density, fertilizing and tending, monitoring and preventing damage to trees.

Sino-Forest’s team of forestry experts applies a disciplined management process to its planted-tree plantations of eucalyptus trees. The process begins with using due diligence to select only those land parcels that are suitable for fast-growing trees, with productive soil, moderate slope, adequate water and sunshine, and is located in proximity to customers.

View our Model

Moving Inland

Having established a strong foothold and leadership position in the south-east provinces of China, Sino-Forest has worked toward expanding and diversifying its plantation portfolio by pursuing tree acquisitions to the northern regions of China. This strategy is aligned with China's 11th 5 year plan (2006-2010) which aims to improve rural area livelihood and develop regional markets. Sino-Forest moved into third tier provinces Hunan in the beginning of 2006, and to Yunnan in 2007.  In this south-west region, Sino-Forest intends to adopt an "integrated model" by acquiring mature trees, selling logs, and/or processing them in our manufacturing facilities to create value-added downstream products while minimizing fibre wastage.  After trees harvested will be re-planted with fast-growing, high-yield species to ensure sustainable development and to meet China’s increasing demand for wood fibre.  In Yunnan, where there are secondary natural forests, Sino-Forest intends to re-generate original species to maintain their bio-diversity.

Mandra Plantations

In 2005, Sino-Forest formed an alliance with Mandra Forestry Holdings Limited by acquiring a 15% equity interest, with the goal of gaining access to timber in Anhui Province near the strategically important Yangtze River Delta. Leveraging the Corporation’s track record and expertise in plantation operation, Sino-Forest will provide plantation management services for a fee is expected to have secured access to a vast inventory of mature and premature Chinese fir and pine trees for its customers. 

Research & Development Expertise

One of Sino-Forest’s strongest competitive advantages is its application of research & development techniques to maximizing the yield (i.e. productivity) of its plantations. Sino-Forest’s present goal is to achieve over 90 m³ of standing timber volume per hectare on its first rotation, which takes about 5-6 years with eucalyptus on its planted-tree plantations, compared to China's average forest plantation yield of 60 m³ per hectare. Sino-Forest also aims to increase its yield to 120 m³ per hectare with use of new planting materials and cultivation technology developed in the next one or two growth cycles.

View how Sino-Forest  maximizes their yield