Summary
¦ James Latham plc bought DLH UK on March 16.
¦ The company invested £4.2m in its acquisition.
¦ Latham’s accounts for 30% of DLH UK’s sales.
¦ The companies will operate as separate businesses.
According to James Latham chairman Peter Latham, the demise of DLH UK would have left a “considerable gap” in the company’s and country’s tropical hardwood supply. Now Latham’s has bought the importer and agent, however, it will be business as usual. In fact it will be more than that, as its new owner aims to grow and develop the company.
The announcement that DLH UK was to close came late last year. It was one of the casualties of a major restructure of its parent, Danish international hardwood group Dalhoff Larsen & Horneman. Entitled “Back to Black” the company said the strategy was triggered by the recession, but some also saw it as the consequence of the business diversifying too far from its original pure hardwood trading roots. Initial moves in the shake up bore out this view, including the disposal of
tt Timber, parent of the forest concession and sawmilling businesses CIB and GIB in Congo and Gabon, the I-dry kilning operation in the Netherlands, facilities in Brazil and Malaysian-based hardwood supplier Carl Ronnow.
Given the tough market, the news that DLH UK was to go as part of this streamlining didn’t take the wider industry entirely by surprise. What did initially was Latham’s decision to buy the business. Other hardwood traders quizzed by TTJ hadn’t seen it coming and wouldn’t hazard a guess at what the importer/distributor planned to do with the company.
Once the acquisition was signed and sealed on March 16, Mr Latham told TTJ that the rationale was two-fold. “First it’s to secure our own supply position,” he said. “We’ve been DLH UK’s biggest customer, accounting for £4.5m of its £15m turnover. In volume terms that’s about 6,000m³ of timber a year; principally sapele, iroko and idigbo from Africa and bangkirai decking and majau from the Far East.”
But, he explained, the move wasn’t just to avoid having to set up new sources of hardwood. Lathams also saw it as a chance to develop its own operation and “grow into areas where [we] don’t do much business”.
“We weren’t looking for it, but when the opportunity arose, we decided it could benefit the business,” he said. “DLH’s particular strength has been in importing African sawn hardwood and we hope to retain and develop their position in this market. Their reputation in decking is also strong and we’d like to see it grow here too.”
Another attraction was DLH’s record in supplying certified legal and sustainable timber and, via its parent, being one of the pioneers in this field. The DLH Group focused especially on FSC certification of CIB’s concessions and the latter now has a continuous certified forest area of 1.3 million ha. DLH UK also has a reputation for certified South-east Asian decking.
“The UK is generally still reluctant to pay the higher price for FSC-certified timber so, sadly, our FSC sapele, for instance, has to date stayed on Lathams’ slow-moving stock list,” said Mr Latham. “But that’s now changing, albeit gradually, and we believe the certified market will develop.”
The new EU Illegal Timber Regulation (ITR), coming into force in 2013 could also benefit companies, like DLH UK, with chain of custody, certification and legal verification firmly built into their systems. “The only slight concern is that the regulation shifts market emphasis so much to legality verification, it lessens the incentive to progress to full sustainability certification,” said Mr Latham.
Lathams bought the share capital of DLH UK, which made profits of £86,000 last year, for a token £1. But it is effectively investing £4.2m in the company to cover the assets, primarily comprising stocks and trade debtors.
It is retaining the company’s seven strong staff, who Mr Latham’s described as a “store of expertise in shipping and importing tropical timber”, and they will work closely and may ultimately come together with Lathams own direct hardwood importing team.
DLH UK is likely to move from its current offices in Kent when the lease expires this year, but will continue to maintain stock in Liverpool and the London/Thurrock area.
The company is also expected to continue to work closely with its former parent. “Although it will look at other supply opportunities as they arise and DLH Group has recently announced a rights issue, so we’ll also be watching that with interest,” said Mr Latham.
He acknowledged that some customers may consider they’d be buying ‘from the competition’ now DLH UK is owned by Lathams.
“But given the breakdown of demarcation lines between importers, agents and distributors, I don’t think it will be a major issue, in fact the response to the acquisition generally has been positive,” he said. “We’re also stressing that we’re establishing Chinese walls between DLH UK and Lathams. Effectively Lathams will be another of their customers and certainly won’t be privy to pricing arrangements with other companies.”
Among Mr Latham’s predictions for DLH UK for the future is that it will be supplying more further processed and finished products.
“In particular, we see potential for laminated tropical hardwood sections for joinery, especially if we can persuade customers to accept more standardised dimensions,” he said.
Overall, Lathams is optimistic for the tropical hardwood business and DLH UK’s place within it.
“There are still preconceptions about tropical timber, but if we can get the right message out there, that it is increasingly available from legal and sustainable sources, the prospects are bright, particularly in architectural specifications,” said Mr Latham. “Certainly the teams at Lathams and DLH UK are positive about the future and their new relationship and that’s a very good starting point.”
