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Woodbois Limited - Quarterly Update

RNS Number : 9106Y
Woodbois Limited
07 January 2020

7 January 2020




Woodbois Limited


("Woodbois", the "Group" or the "Company")




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 31 December 2019 (Q4 of the Group's 2019 financial year). All numbers below are from unaudited management accounts.


·    Record quarterly revenues with $5.6m generated in Q4 2019

·    Record quarterly revenues of $3.8m in Q4 from trading division

·    Record annual revenues of c$20m for 2019, 48% increase year-on-year

·    Upgraded sawmill completed and operational on time and within budget, confirmed yield improvement


Paul Dolan (CEO) commented, "The business has continued its rapid and consistent growth path throughout 2019 with revenues once again rebased year-on-year. Management have also executed effectively on the Group's capital expenditure led strategic plans, building Woodbois brand value and positioning the Group to achieve significant levels of growth and profitability in the decade ahead. While aiming to continue the delivery of significant levels of top-line growth during 2020, the Group will also implement measures to strengthen its cash balance and improve margins, while further leveraging its fixed cost base to improve overall profitability."


Accelerated revenue growth and brand recognition

Record quarterly revenues of $5.6m during Q4 represent a 65% increase from 2018's average quarterly run-rate. Continued quarter on quarter growth accelerated into the year-end, enabling the Group to deliver a fifth consecutive record quarter. Revenue gains were recorded by both the forestry and trading divisions, driving total revenues for the year to almost $20m and year-on-year growth of 48%. These increased revenues have been achieved without increasing administration expenses, and with a year-on-year decrease of approximately 20% in operating expenses.


The re-tooling of our sawmill in Mouila, Gabon has been successfully completed on time and within budget, and a step-change in recovery rates from the new bandsaws has been immediately realized. Increased future profit margins from better rates of recovery fully justifies the capital expenditure and management time committed to this project in 2019. Furthermore, we believe the premium quality sawn timber now being produced will materially enhance recognition of the Woodbois brand.


Trading division

As anticipated, the increased utilization of the Internal Trading Fund facility helped drive further growth in trading revenues for the quarter to a record $3.8m, representing a 90% increase from the average quarterly run-rate of 2018. Margins within the trading division also improved during Q4, raising the 2019 margin for the division to 11%, up from 10% during the first half of the year. With a proven record of growing the business through attracting and utilising trade finance, the trading team has continued to focus on expanding the supplier network to meet the global demand for traceable, sustainable hardwood products generated by our sales team. 2019 total trading revenues of $13m are equivalent to approximately 0.3% of the total African timber export market, leaving significant room for the Group to capture market share and continue to grow as we strive for a position of market leadership.


Forestry division


With the installation of kiln drying facilities in Gabon completed during September 2019, the race was on to complete all civil works required to house new heavy-duty sawmilling equipment arriving from China and Slovenia. In challenging conditions, our in-house construction and maintenance team once again delivered impressively, both on time, ahead of the year-end deadline, and within budget. Data gathered during the testing of the new production lines while staff were trained during November and December showed an improvement in yield from 33% to 41%. As the team becomes more familiar with operating the new equipment, further improvement can be expected and an internal target of 44% recovery has been set for Q1 2020. Sawmill yield is a critical KPI since improved yields imply higher levels of output, and therefore revenue, for the same unit cost of input.


The transformation of our facility in Mouila during the course of 2019 enables Woodbois to produce superior, premium-grade product while extracting improved levels of recovery from our raw material. Taken in combination with the kiln drying of our sawn timber being brought in-house, we expect the division to deliver both an increase in revenues and an improvement in margins during 2020, providing a solid and fundamental pillar to future Group profitability.



While investment and management focus within the Group has largely been concentrated on expansionary projects in West Africa during 2019, the team in Mozambique has strictly followed a more conservative, domestic led agenda. Encouragingly, the cost management, reforestation and limited production goals that were set for the business in Mozambique at the beginning of 2019 have largely been met, which may encourage the Board to be more receptive to proposals from the local management team to follow a more expansionary agenda going forward. 2020 is set to be a big year for Mozambique with IMF financial support set to resume after being suspended in 2016 following the disclosure of undeclared debts. The Fund has already clarified availability, an important validation for the country's accounts. Investments related to the liquefied natural gas megaprojects include a "gas city" to house 150,000 inhabitants. Works requiring timber as a construction material have already started, and our sales team is focused on generating orders from the contractors involved as these projects continue to take shape in 2020 in preparation for the start of liquefaction and export of natural gas in 2024.


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 was 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. Given the lack of resolution to date, we will now be guided by our legal advisers on next steps. Apart from minimal winding up expenses, the Group has no ongoing cost commitment in Tanzania




Woodbois Limited

Paul Dolan - CEO

Kevin Milne - Interim Chairman


+44 (0)20 7099 1940


Arden Partners Plc (Nominated adviser and broker)

Richard Johnson

+44 (0)20 7614 5900




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