REG - Woodbois Limited - Q3 2022 Update and Board change

WoodboisAnnouncement

17/10/2022 07:00

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RNS Number : 0186D  Woodbois Limited  17 October 2022

17 October 2022

Woodbois Limited

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

Q3 2022 Update and Board change

 

Woodbois Limited (AIM: WBI), the African focused forestry, timber trading,
reforestation and voluntary carbon credit company, is pleased to announce its
update for the third quarter to 30(th) September 2022:

 

Substantial production increases maintained, gross margin improved

·    Record quarterly revenue, up 29% to $5.8m in Q3 2022 vs Q3 2021
$4.5m.

·    Record nine months revenues of $17.1m in 2022 vs $12.7m for the same
period in 2021, up 35%.

·    Group gross profit margin for first 9 months of 2022 further improved
to 24% from 20% in FY 2021 and 23% in H1 2022.

·    Cash balance of $1.4m as at 30 September 2022

·    Period end working capital(1) of $9.3m of which inventory was $6.1m
and excluding bank and other loans of $12.3m

·    Q3 Sawmill production 6,032m3, a 78% increase on the 2021 quarterly
average

·    Q3 Veneer production 1,418m3, a 45% increase on the 2021 quarterly
average

Total output from our factories increased again during Q3, with new records
for production set for sawn timber and consistent output of veneer. The total
quantity of goods shipped was marginally above the strong previous quarter,
making it a record quarter for shipping of own production.

The veneer team will work on test orders from the bigger second line, as its
output is progressively ramped up during Q4. Commissioning issues such as late
receipt of parts delayed its start-up but the benefits of its higher
value-added products will be increasingly seen as higher volumes of veneer are
shipped in 2023.

Financial

Additional economies of scale continue to be realised as factory output
increases, and these economies combined with a careful focus on cost control
delivered further improvements in Group gross profit margins to 24% for the
first nine months of 2022 vs 23% in H1 and 20% for FY 2020. Working capital
marginally reduced to $9.3m at 30 September 2022 owing to expected capex.
Total borrowings decreased marginally during the quarter from $12.4m to $12.3m
reflecting machinery lease repayments made during the period.

The Group has reduced senior management head-count and costs, which will
benefit Q4. The Group is also focused on higher margin own-product sales and
improving working capital  and is therefore planning a reduction in third
party sales in Q4. The raw material from our forestry concessions provides
some protection from inflation, whilst our revenue mix is largely USD based
and many costs are incurred in local currencies. Accordingly we expect some
further improvement in gross margin in Q4.

Operational

The investment into plant and machinery and the quality of the personnel
recruited and integrated over the last two years is yielding both higher
volumes and margins as quality continues to improve. Maximising margin through
identifying the optimal markets to sell into has been a key focus for our
revamped sales team who have been highly visible and were successful in
generating orders from new customers at recent trade shows in Algeria and the
USA.

 The Group will continue to broaden its distribution channels in existing and
selective new attractive markets. In the near-term Woodbois will concentrate
on making sales into geographies experiencing high levels of economic growth,
such as the Middle East and North Africa, with strong representation at the
final trade show of the year in Egypt in December.

Availability of containers for shipping continued to improve during Q3 and the
sharply elevated prices for sea transport experienced since 2020 continued
their gradual downwards trend towards pre-pandemic levels. The Group expects a
higher interest-rate, higher-inflation, lower-growth economic environment
worldwide to lead to some softening of demand. However, our substantial recent
investments in production facilities will increasingly enable Woodbois to sell
a greater proportion of higher value-added products to a broader range of
markets.

Completing FSC certification of our forestry concessions and factories remains
a top priority for the Group. Significant progress has been made during 2022
and we are now 62% complete. Certification will increase markets, margins and
profitability.

It is an aim of the Group to become carbon neutral in the medium-term and
thence to becoming carbon negative through the development of carbon projects.

Carbon

Planning for our initial large-scale afforestation project in Gabon continues
to be the focus for the carbon division and discussions with the relevant
government Ministers have continued to progress. Because the timing of
allocation of land for this project is not within our control and to validate
our proof-of-concept we will commence a limited initial pilot project on an
area of low carbon stock land within our existing concessions. Upon receiving
any grant of land from the government we will immediately look to scale the
pilot scheme, preferably with the financial support of one or more external
funding partners.

COP27 will take place in Egypt shortly. As chair of the African Group of
Negotiators on climate change and noted as the most carbon negative country on
earth, Gabon is expected to continue to play a prominent and leading role.
Members of Woodbois' senior management will attend and will be available to
meet stakeholders throughout the event.

Board

After approaching four years as a Non-Independent Non-Executive Director and
owing to his growing other work commitments at the Company's second largest
shareholder, Lombard Odier, Henry Turcan is today standing down from the
Board. His energy and guidance have helped to transform the financial health
of the Company, its performance and its governance. The Board express their
grateful thanks to him on behalf of all stakeholders. The Company will appoint
a further Independent Non-Executive in due course.

Outlook

The investments made over recent periods are projected to enable Woodbois to
maintain its organic growth path with additional higher-value-added capacity
coming online, de-bottle-necking benefits and utilisation of all of its
concessions now the access roads are completed. Incremental margin growth
through the learning and adoption of smarter working practices in all areas of
production and distribution is also an achievable target.

Recently, given the rising likelihood of some pricing pressure however, its
was felt prudent to reduce exposure to third party trading for Q4 2022 and
focus on own-products. The Group will utilise its proprietary in-house
technology to carefully monitor risk, market pricing and demand to support
further revenue and margin expansion in Q4 and in 2023. Benefits are also
expected from our recently revamped and highly motivated trading and support
team, using our custom-built analytics.

CEO Paul Dolan commented: 'The business maintained its strong momentum
throughout Q3, delivering record quarterly revenues, production and margins.
Mindful of current worldwide uncertainties we will continue to be resilient
and adaptable. With further high-value production increases underway we have a
busy run-into year-end. Almost regardless of market conditions we look forward
with confidence to further growth in 2023 and beyond.'

(1)( )Working Capital is a non-IFRS measure and consists of Cash, plus
Inventory, plus Receivables, less Payables.

 

Enquiries:

 

 Woodbois Limited

 Paul Dolan - CEO                      + 44 (0)20 7099 1940

 Carnel Geddes- CFO

 Canaccord Genuity, Nominated Advisor  +44 (0)20 7523 8000

 Henry Fitzgerald-O'Connor

 Gordon Hamilton

This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 which forms part of UK law by virtue of the
European Union (Withdrawal) Act 2018 ("MAR").

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