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Obtala encouraged by trajectory of top line

Ninety containers of Obtala's sawn timber was shipped in the third quarter versus a quarterly average of 62 containers the first half of 2018

Timber on a lorry
Obtala said 95% of sawn timber production came from Gabon despite the August holiday season

The order book for Obtala Ltd’s (LON:OBT) trading business remains very healthy at more than US$10mln, the company said in a third-quarter update.

Third quarter revenue of US$3.2mln was on a par with quarterly revenue in the first half of the year and means revenue in 2018 has already exceeded the amount for the whole of 2017. Revenues for the current financial year are expected to exceed US$10mln for the first time.

READ: Obtala revenues rise as Gabon sawmill operation ramps up

During the quarter, the principal focus for the group remained on increasing output from its profitable assets in West Africa and on reducing the cost of production.

Sawn timber output rises, despite the August holiday season

The output of sawn timber totalled 3,900 square metres (m3) versus 3,800m3 in the second quarter and 3,600m3 in the first quarter. Obtala said 95% of sawn timber production came from Gabon despite the August holiday season.

As Gabon's rainy season commences in October overall production is expected to decrease slightly in the final quarter of the year.

READ: Obtala looking to apply a veneer of success

As previously mentioned, new timber export rules introduced in Mozambique have put the future of the group’s forestry operations there in doubt. In view of the export ban, the group has elected to perform a very limited harvest this year and sell the timber exclusively to the domestic market.

Meanwhile, back in Gabon, the third quarter saw the handover of the new veneer factory to the newly hired production team.

You’re twisting my melon, man

The 2018 harvest of 24 hectares of sweet melon is currently underway and initial containers have been sent to Dubai and the UK. The percentage of Caribbean King Melons to reach the size demanded by the Middle Eastern market has been lower than expected, hence the shipments of smaller sizes to the UK where Obtala is currently waiting to see what prices will be achieved.

The internal trading fund attracted additional capital

The order book for the trading business stands at more than US$10mln and the group is looking forward to converting more of this business as trade finance facilities grow.

The internal trading fund (ITF) attracted additional capital during the quarter and now stands at US$4mln. The initial tranche of ITF deployed in January 2018 has been recycled on average every 80 days and average margin per trade has been above 10%.

“With top-line growth showing an encouraging trajectory, management focus must now fall squarely on the underperforming, loss-making legacy areas of the business as we seek to complete the turnaround by delivering a positive bottom line. The results for the first half of 2018 laid bare the reality of the improvement that is required. As announced simultaneously with the results for H1 2018, a strategic review of these business units is now underway, with all recommendations to be considered and examined in detail by the board,” said Paul Dolan, the chief executive officer of Obtala.

“As previously stated, the board is unlikely to accept any proposal that involves material losses from any business line being sustained in the next financial year,” Dolan added.

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