Woodbois (LSE:WBI)
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RNS Number : 8071J
Woodbois Limited
16 April 2020
16 April 2020
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
Woodbois Limited
("Woodbois", the "Group" or the "Company")
(AIM: WBI)
Quarterly Update Q1 2020
-- Revenues of US$4.9m in Q1, 10% increase on Q1 2019
-- Working capital enhancement measures announced
-- Recommencement of operations in Mozambique after more than two years
-- Resilience plans being enacted in response to COVID-19
-- Gabon activities temporarily halted in April as country enters COVID-19 lockdown
Paul Dolan (CEO) commented, "At this time, a global recession appears inevitable, but whether it will be short lived or more protracted is unclear. The Board is putting in place the necessary measures for Woodbois to weather either scenario. Whether economies emerge from this pandemic with a slow recovery or with stimulus-driven strong rebounds, demand for sustainably sourced tropical timber as a construction material across the globe is expected and Woodbois will be positioned to deliver. Resilience and flexibility are integral within the Woodbois psyche and culture, and at challenging times like these, organisations and individuals with such characteristics differentiate themselves. While paying close attention to our working capital requirements in the months ahead, we will do everything in our power to support our staff, our suppliers and our customers to ensure that we emerge from this difficult period stronger and more united."
Revenues in Q1 increased by 10% year-on-year with no discernible slowdown in demand evident until the end of the quarter when new enquiries tailed off sharply due to the global impact of COVID-19. Trading activity to-date in April remains limited, although enquiries from Asia have been increasing as lockdowns are relaxed.
The first full quarter of production at the newly re-tooled sawmill in Gabon saw production increase by more than 100% over the previous quarter, with recovery levels of 40%, up from an average of 34% for 2019. Revenues from production are typically captured upon shipment in the following quarter while higher levels of recovery are a direct driver of margin increase. Volume and recovery levels are carefully tracked and scope remains to improve both measures as staff become more familiar with operating the new equipment. At the end of March, a new Mebor sawmill line arrived from Slovenia. This new line will be assembled and tested as soon as travel restrictions into Gabon are relaxed. The additional capacity from this new line, in addition to the new equipment that recently became operational will enable us to provide higher volumes of premium quality sawn timber to our customers as soon as demand recovers.
Production at the Gabon veneer factory and sawmill was tapered down from the beginning of April due to government measures restricting the numbers of people in working environments, intended to limit the spread of COVID-19. On 10 April 2020, the Government of Gabon announced, amongst other measures, that the country would enter lockdown for a two week period commencing on 13 April 2020 meaning that our veneer factory and sawmill in Mouila has closed until the lockdown ends.
As per the announcement of 16 January 2020, management and the Board place significant emphasis on actively managing the Company's working capital. The measures announced at that time were taken in order to enable growth opportunities and to maintain the Company's trajectory of rapid growth. The impact of COVID-19 at that time was still largely limited to China, but has subsequently spread worldwide. However, the support of our major stakeholders, and the process developed in agreeing the capital management measures announced in January, have helped the Group to respond rapidly and systematically to the challenges arising from the COVID-19 pandemic.
At that time, we announced that the Company's largest shareholder, 1798 Volantis Fund Limited, a fund managed on a discretionary basis by Lombard Odier Asset Management group, had conditionally agreed to provide an additional US$1.0m through investment into the Group's ITF by way of an additional loan agreement with Woodbois Trading Limited, and USD$0.5m has been drawn down to date. Further drawings are by mutual agreement.
On 19 March 2020, we announced the signing of a management agreement (the "Agreement") with Future Earth II LLC ("Future Earth"), a US company with substantial concessions in Mozambique, creating a relationship under which Future Earth will fund, manage and operate Woodbois' Mozambique concessions, employees and equipment, in order to produce sawn lumber and veneers to be sold by Future Earth on a profit share basis.
The Woodbois concessions in Mozambique have been on a care and maintenance basis for over two years, partly due to an industry export ban in 2018 and due to the quantum of investment required to restart and to enlarge the operations to be able to earn an acceptable return on capital comparable to the Group's other business segments. Management have been seeking the optimum way to recommence operations and believe the Agreement with Future Earth provides material benefits to both parties, not least from the economies of scale arising from Woodbois' approximately 300,000 hectares and Future Earth's approximately 620,000 hectares of concessions.
Enquiries:
Woodbois Limited
Paul Dolan - CEO
www.woodbois.com
+44 (0)20 7099 1940
Arden Partners Plc (Nominated adviser and broker)
Richard Johnson
+44 (0)20 7614 5900
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April 16, 2020 02:00 ET (06:00 GMT)
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