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Obtala sees 'supercycle' ahead for forestry and agriculture

“The trade finance facility will provide the trading division with the necessary capital to achieve 3-4x growth in the next 18 months.”

picture of wood
Finance facility wil give the timber trading arm a lot more leeway

Obtala Ltd (LON:OBT) expects to have arranged and be utilising a US$25mln trade finance facility by the fourth quarter.

The money will send revenues soaring at its forestry business, Woodbois, said the Africa-focused group in its quarterly business update.

READ: Obtala expects major Woodbois boost going forward

Woodbois, which was acquired at the end of June, has substantial timber assets in Gabon and Mozambique.

“The trade finance facility will provide the trading division with the necessary capital to achieve 3-4x growth in the next 18 months.”

“This facility will also help finance the working capital for our own production assets and significantly improve cashflow.”

Obtala is currently boosting production through sawmills in Gabon and also Mozambique, where a new 100m3 (cubic metre) sawmill will come on stream by the end of the year.

READ: Obtala says second half expansion plans unaffected by delays to subscription agreement funds

In the third quarter, over 15,000m3 logs were harvested from the forest and 4,500m3 of export grade sawn timber produced. 

"Prices for our main species have remained stable, with average realized sales price of $400 - $900 per m3 depending on species and grade," Obtala said.

The AIM-listed group added it had also adjusted the WoodBois purchase price down to US$12.2mln from US$14.6mln after a working capital adjustment.

Demand for food, housing not matched on supply side

On the agriculture side, the melon harvest has now been processed with first exports through Mombasa.

Miles Pelham, Obtala’s chairman, said: "The time spent during the past three months working alongside the WoodBois team, who have decades of forestry trading experience, has cemented our view that we are on the cusp of a super cycle in timber and agriculture pricing.“

“Growth in the global middle class, is creating demand for food and housing that is simply not being matched on the supply side.

“In an environment of low interest rates with investors hunting for yield, there is an outsized opportunity to fund our trading business to many multiples of current revenue and profit levels that I am sure we will begin to capture in the coming months."

Quick facts: Woodbois Limited

Price: 2.1 GBX

Market: LSE
Market Cap: £30.05 m

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