TIDMWBI
RNS Number : 3558P
Woodbois Limited
10 October 2019
10 October 2019
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.
Woodbois Limited
("Woodbois", the "Group" or the "Company")
(AIM: WBI)
Quarterly Update
Woodbois, the African focused forestry and timber trading
company, is pleased to provide a quarterly update on operations for
the three months ended 30 September 2019 (Q3 of the Group's 2019
financial year). All numbers below from unaudited management
accounts.
-- Record quarterly revenues with $4.9m generated in Q3 2019.
-- Record quarterly revenues of $3.4m in Q3 from trading division.
-- Record quarter of export of own production sawn timber and
veneer with 120 containers shipped.
-- New kilns completed on schedule and operational in Gabon
-- Upgraded sawmill in Gabon on track to be fully operational during Q4 2019
-- Membership of Congo Basin Forest Partnership
Consistent revenue growth
Record quarterly revenues of $4.9m during Q3 represented a 44%
increase from 2018's average quarterly run-rate, and continued
quarter on quarter growth. The trading division performed
particularly strongly with $3.4m in revenues. Revenues from our own
production were $1.5m, but were impacted adversely by the halting
of timber exports from Gabon during the summer due to the
'kevazingogate' scandal created by the attempted illegal export of
logs. The export from Gabon of logs of all species has been banned
since 2010. With the export situation for processed timber products
returning to normal, our pace of shipments picked up sharply by the
end of the quarter, with revenues from these later shipments due to
fall within Q4.
Trading division
Record quarterly revenues of $3.4m from the trading division
represent a 70% increase from the average quarterly run-rate of
2018. With the balance of the Internal Trade Finance Facility
raised earlier in 2019 being put to work during Q3, further revenue
growth from the trading division is expected.
By way of context, while pricing of some more expensive species
has fallen by around 10% during 2019, global demand for African
hardwood logs has remained consistent despite the backdrop of an
economic slowdown in China, which typically accounts for around 50%
of total demand. Overseas access to this raw material is
diminishing however, as the IMF and other foreign donors exert
pressure on African governments to implement sustainable harvesting
policies and restrict or completely ban the export of logs in order
to encourage in-country processing. Equatorial Guinea became the
latest country to implement such a ban in May 2019, with Congo and
Cameroon, traditionally large exporters of logs, implementing a
quota system whereby the majority of logs of specific species must
be processed in-country prior to export. These moves are strongly
to the advantage of Woodbois due to our strong network of suppliers
who are already processing timber in-country.
Our trading strategy is to actively engage with and support
suppliers who operate within clearly defined sustainability
guidelines verified by accredited independent 3rd party auditors.
Advising these suppliers on technical specifications, and how to
achieve the standards of compliance required in order to access
international markets helps to improve their margins and enables us
to lock in long-term contracts, increasing certainty for both
parties.
Forestry division
The completion of the installation of drying kilns at our
sawmill in Mouila in September saw a major milestone reached and
shareholder value created. We anticipate margin improvement of
around 8% from sawn timber as a result of bringing this activity in
house, with a further 2% margin increase from reduced logistics
costs.
Thanks to months of research and planning, the lead-time from
order to installation was impressively quick. I'm also pleased to
report that the level of support throughout the process from
Techdry, the Chinese manufacturer, has been nothing short of
excellent. I look forward to ordering more kilns from Techdry as we
expand capacity in Gabon, or elsewhere in the future.
Focus is now on installation of the new production lines to
upgrade the sawmill in Mouila which are scheduled for completion
during the current quarter. Once all of these major works are
completed, and with a year of 'learning by doing' under our belts
at the veneer factory, an expectation of revenue and profitability
growth from our production facilities in 2020 would appear to be
justified.
Mozambique
While management focus has understandably been largely on
expanding the trading operation and upgrading facilities in West
Africa, where the rapid payback on allocated resource is proven,
the team in Mozambique has been driving a domestic-based agenda,
centred on opportunities emerging from the large-scale
infrastructure installations that are underway to support the
multi-billion dollar Mozambique LNG project. To date, we have
supplied several trial orders for dunnage, which is used to
separate large oil and gas pipes and have contributed to tender
proposals for timber-based solutions for worker accommodation.
These areas have the potential to lead to significant levels of
demand and we will continue to push hard on both of these
fronts.
Tanzania
Envision, the Tanzanian entity which purchased the Tanzanian
agriculture business from us, has not yet paid the initial proceeds
in accordance with the payment schedule agreed in the Sale and
Purchase agreement ("SPA"). The legal action that we had commenced
against Envision has now been stayed until the end of 2019 to allow
for mediation between the parties with the objective of giving
Envision the time required to secure the funds required to meet
their commitments as set out within the SPA. The Group is still
settling outstanding creditors (circa $182,000 at 30 June 2019) and
apart from minimal winding up expenses, the Group has no ongoing
cost commitment in Tanzania.
Preference Share Restructure into 4% Convertible Bond
The board resolved to approve the proposed restructure of the 5%
perpetual preference shares in Woodbois subsidiary Argento. The
preference shares will be repurchased in exchange for the issue of
Bonds by the Company, at a ratio of US$400 in nominal value of
Bonds for every one Preference Share for an aggregate value of
US$30m. A Trust Deed has been entered into between the Company and
Woodside Corporate Services Limited acting as the trustee for the
bonds and the Company is currently in the process of exchanging
contracts with each of the Preference Shareholders.
A Closing Date of 20th October 2019 has been detailed for the
purpose of the 4% interest payment due which will be calculated per
annum by reference to the principal amount thereof and is payable
annually in arrears within ten business days following 30 December
in each year with the exception of 30 December 2019.
Congo Basin Forest Partnership
Finally, I'm very pleased to announce that Woodbois has joined
the Congo Basin Forest Partnership (CBFP). The CBFP is an
international association of more than forty governments,
international organizations, private sector and civil society
representatives, is designed to enhance the sustainable management
of the Congo Basin ecosystem. Membership of the CBFP will allow
Woodbois to engage in discussions and initiatives that promote the
sustainable management of forests in the Congo Basin.
The partnership promotes economic development, poverty
alleviation, and effective governance through the conservation and
sustainable management of natural resources, including forests and
wildlife. The CBFP, established at the 2002 World Summit on
Sustainable Development, operates within the framework of the
Council of Ministers in charge of the Forests of Central Africa
(COMIFAC) and in accordance with COMIFAC's strategic plan, the Plan
de Convergence.
Given the importance that our customers attach to using only
sustainable hardwood products, it is both important and valuable
for Woodbois to work alongside key sustainability-driven
organisations such as the CBFP.
We still have much to achieve this year as we enter the home
straight of 2019, but we draw great encouragement from all that has
been achieved during the year to date and the consistent
progression and evolution of the business. Thank you for taking the
time to read this report and for your ongoing support.
Paul Dolan
CEO
Woodbois Limited
Paul Dolan - CEO
Kevin Milne - Interim Chairman
www.woodbois.com +44 (0)20 7099 1940
Arden Partners Plc (Nominated adviser and broker)
Tom Price +44 (0)20 7614 5900
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END
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