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Obtala expects positive trend seen in 2018 to accelerate this year as it overhauls business

Chairman Miles Pelham said Obtala made great strides in 2018 and has the “nuts and bolts” in place for 2019.
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Obtala plans to change its name to Woodbois

Obtala Ltd (LON:OBT) had a strong finish to 2018 and expects further progress this year as it restructures the business to focus on its growing forestry and timber division.

The firm recently completed a strategic review of the loss-making parts of the business and decided to become a timber-dedicated business in Africa.

To reflect this shift, Obtala plans to change its name to Woodbois, the timber business company it bought last summer.

Shareholders will vote on the proposed name change at the group’s annual meeting this year.

Chairman Miles Pelham said Woodbois has more than a decade of good credibility in the timber market so it made sense to choose this as its new name to mark an “end of an era” for Obtala.

Obtala has ‘nuts and bolts’ in place for 2019

Pelham added that the company made great strides throughout 2018 and has the “nuts and bolts” in place for further progress in 2019.

“The company should certainly benefit from the heavy cost cutting we did throughout the year and throughout all of the last year as well,” he added.

Earlier this month the group announced a series of deals that it expects to positively impact its balance sheet and underlying business structure.

It agreed to sell its Tanzanian agricultural business for US$2.5mln to local partner Envision Consulting, it will receive about £6mln of investments from a fund managed by Lombard Odier Asset Management, and, it is to take full ownership of its currently 75%-owned Montara Continental farming subsidiary.

The 1798 Volantis Fund ltd, the fund managed by Lombard Odier Asset Management, has bought some £2mln in Obtala shares, taking its stake to 12%. The fund has also given the firm a US$5mln loan, secured against trade receivables and qualifying timber inventory.

Simplifying the ownership structure, Obtala is acquiring the 25% of Montara owned by partner Africa Resource Investment (ARI) for up to US$5mln – US$2.5mln initially and a further US$2.5mln following the completion of the Tanzania agriculture sale.

“We believe these developments have the potential to be transformational for Obtala and provide the group with the strongest possible start to 2019,” said Pelham.

Strong finish to 2018

In the final quarter of 2018, the company saw revenue rise to US$3.7mln from U$$3.2mln in the preceding quarter. That takes the total for the year to US$13.5mln, up from US$8.4mln the year before.

The group shipped 77 containers of own production of sawn timber in the period, compared to a quarterly average of 71 for the first three quarters.

During the period, Obtala directed its attention to increasing output from its profitable assets in West Africa, reducing costs, attracting additional trade finance funding, and improving margins by leveraging its fixed cost base to reduce the cost of production.

"The positive transition within the operating business during 2018 has resulted in a further upward rebasing of revenues, a trend we expect to accelerate into 2019,” said Paul Dolan, the chief executive officer of Obtala.

“The efforts made to generate this result have been mirrored by intensive management focus on cost reduction, streamlining of the corporate structure, strengthening the balance sheet and creating a board with the strongest possible credentials within our chosen sphere of competition. I look forward to communicating further progress on all of these fronts during 2019," he added.

In a bid to improve output, the company made improvements to its Veneer factory in the fourth quarter. It has allocated further capital expenditure to install a debarking machine, two hydraulic lifters and a hydraulic press at the factory in the first quarter of 2019, which will reduce the amount of manual labour involved in production and post-production.

Obtala has also ordered new equipment for the Gabon sawmill and that is scheduled to be commissioned and fully operational by the end of January.  The company said the new equipment will improve the finished quality of its sawn lumber, which will in turn open new export markets for its own production.

An order has been placed for new kilns, which are due to arrive in the second quarter and be operational the following quarter. By using its own kilns instead of outsourcing, the company expects to save itself about US$700,000 per year and that will go straight to the bottom line. 

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Chairman Miles Pelham said Obtala made great strides in 2018 and has the “nuts and bolts” in place for 2019.

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