Branching Out

How did Proteak perform in 2014?

Last year was a terrific period for Proteak. We are developing the largest-ever project in the forestry industrial sector in Mexico. With an investment of $200 million, it involves building the largest plant for manufacturing MDF boards in the Tabasco region, which is set to commence operations later this year. We have been developing it on time, and on budget, which can be quite a challenge given prevailing conditions in Mexico. Half of our business in that area is related to teak, and we have been able to position Proteak’s output in the Asian markets at a premium, despite fierce competition. Last year saw a record area planted for Proteak. We are by far the largest planter in Mexico, and we planted 2,500 hectares of high-productivity teak and eucalyptus in 2014. Finally, I believe that the capital markets are at last reacting to our solid fundamentals as a result of which our stock has appreciated by around 40%.

Proteak’s investment in Tabasco is one of the largest in Mexico’s forestry sector in recent years. How important has this investment been locally for your industry?

We are a highly entrepreneurial company, ever pursuing new projects. Tabasco is a particularly interesting project in the context of Mexico’s terrific natural conditions for the development of the forestry sector. It has considerable precipitation, excellent soil, and plentiful sunlight. Yet despite such enviable conditions, we have been unable to fully develop our forestry sector. Indeed, forestry products account for one of the largest deficits we carry in our trade balance. This spans logs, paper, cartons, boards, and so on. Currently, we import around 90% of all the MDF boards and other products that Mexico consumes. This is because we haven’t invested in our forests, as Mexico is a net deforester. Most probably for the next five to 10 years, the forestry sector will remain deficient. It was in this context that Proteak was launched, initially with several teak plantations some 14 years ago. We have been planting teak, which is a high value timber, on the Pacific coast for years. In doing so, we have developed a unique knowledge and platform to develop forests in Mexico. Few companies in Mexico are following suit, which positions Proteak uniquely to tackle the opportunities available in this sector. It is through this platform that we decided to enter the MDF business. This is an integrated project resting on three pillars. On one hand, it is the only project in Mexico that produces its own wood. Most input that Mexico consumes comes from natural forests. One of our competitive advantages is that Proteak produces its own resources. Allowing us to do so are our 9,000 hectares in the Tabasco region, and we are planning to have at least 2,000 more. Secondly, we will also be self-sufficient in energy, another key component in the production of MDF boards in terms of heat and electricity. Through cogeneration and some biomass from our own production process, we will be able to supply all the heat that the process requires and even surplus energy that we will sell off to other parts of Mexico. And thirdly, we are introducing leading German technology for board production in what is a state of the art process resulting in high quality boards unique to us in the Mexican market. These factors combined render Proteak well positioned to pursue opportunities in the Mexican market. Additionally, this is an unprecedented investment for the region, since Tabasco’s economy is highly dependent on the oil industry. We know of no other investment in the region of such scale and with such positive environmental, social and economic impact.