Shipbuilder JES eyes forestry business in Congo

The diversification move comes at a time when the global shipbuilding industry, especially China's market, is undergoing a severe downturn that has seen the collapse of several small to medium sized Chinese yards.

“The group believes that this acquisition is an excellent opportunity to diversify our cyclical shipbuilding business. The target already has a forest harvesting licence for a sizeable forest area,” said Jin Xin, chairman and ceo of JES.

SCIBOIS owns 75% stake in De Commerce Internationale Du Bois Au Congo SCIBOIS SPRL (STE) based in Congo. STE is in possession of a forest harvesting licence until May 2036, in respect of a forest area of approximately 229,400 hectares. The value of this forest area is estimated at more than $3bn.

The acquisition of SCIBOIS by JES is scheduled to be completed before 15 July this year.

JES, with the inclusion of the forestry assets, targets to tap into potential debt capital markets for raising significant amount of funds in order to develop both shipbuilding and forestry businesses. The company said the forestry asset will be used as collateral for such possible debt issuance.

The forestry move follows closely an alarm sounded by auditor BDO over the ability of JES to continue its business due to its liabilities heavily outweighing its current assets.

Apart from the latest forestry investment, JES has also announced investments into mining in China's Xinjiang province as part of its effort to secure a different source of long term and sustainable earnings and cash flow streams.