REG - Woodbois Limited - Q4 2021 update

WoodboisAnnouncement

13/01/2022 07:05

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RNS Number : 3324Y  Woodbois Limited  13 January 2022

13 January 2022

Woodbois Limited

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

 

Q4 2021 update

 

Highlights

 

Financial (preliminary / unaudited)

 

●             $17.5m total revenue FY 2021 vs $15.2m FY 2020, a
15% increase.

●             FY 2021 gross profit up 180% to $3.3m vs FY 2020
of $1.2m.

●             FY 2021 gross profit margin more than doubled to
c20% vs 8% in FY 2020.

●             $1m EBITDAS FY 2021 vs negative $1.7m in FY 2020,
marking a first year of positive EBITDAS.

●             Finance charge of $0.6m for FY 2021 vs $2.8m for
FY 2020, a reduction of 79%.

●             Q4 2021 revenue $4.8m, up 50% on the $3.2m in Q4
2020.

●             Cash balance of $0.9m as at 31(st) December 2021.

●             Period end working capital of $7.7m, of which
inventory was $5m, and excluding bank loans of $8.5m.

 

Post Period End

 

●             Unutilised loan facilities of an aggregate $4m put
in place with Lombard Odier and Rhino Ventures, our two largest shareholders
to meet near-term needs caused principally by shipping delays and
Covid-related disruption.

●             Further growth planned for 2022, subject to
shipping and container availability.

 

Operational

 

●             2021 sawn timber production of 13,100m3, an 84%
increase year-on-year ("YOY").

●             2021 veneer production of 3,800m3, a 78% increase
YOY.

●             Installation of second veneer line ongoing,
completion expected by the end of Q1 2022: expected to double capacity in
2022.

●             In Mozambique, conditions remain challenging and
the Group is reviewing its strategic options.

 

Planned Board strengthening completed in November

●             Paul Dolan remains Executive Chair and
relinquishes CEO role.

●             Federico Tonetti appointed as CEO.

●             David Rothschild appointed as Independent NED.

 

Summary Reflections on 2021 and Outlook for 2022

 

The outturn for 2021 was characterised by strong operational progress but
constrained by sustained shipping and container difficulties and Covid-related
disruption, not least in Q4, a pattern that is likely to continue, at least in
the first half of 2022.

 

 

Severely constrained shipping and logistics due to COVID, lowered the level of
cash generated in 2021 and this put greater than expected strain on our
working capital, particularly in Q4, causing the potential for a near-term
cash bridging as we enter 2022.  Accordingly, the Company has recently
arranged a $2m general purpose two year facility with Rhino Ventures Limited,
the Company largest shareholder and a further facility of $2m if additional
short term working capital finance is required with Lombard Odier, the
Company's second largest shareholder.  The former is capable of being drawn
with immediate effect whilst the latter requires lender approval at the time
of any drawdown request.  Both facilities carry interest rate at 8.5% on any
drawn amounts.  The Lombard Odier loan is repayable within 90 days of any
drawdown and secured against receivables. The Rhino Ventures loan is repayable
in January 2024 and is unsecured. These facilities are intended to ensure a
stronger working capital position as the Company works through the logistical
challenges it faces to deliver inventory to customers, and to ensure the
effects of shipping delays and Covid-related disruption can be more easily
dealt with until that industry normalises.

 

Looking forward, our operations in Gabon are primed to continue delivering
strong and profitable growth, not least as a result of the capital projects
undertaken in 2021 and continuing into Q1 2022.

 

The Company remains confident of materially increasing revenues and
profitability during 2022, however due to expected continued shipping delays
this growth is likely to be lower than previous expectations.

 

Having recorded an 84% increase in production levels of sawn timber during
2021, we still have existing capacity to increase output by a further 50%. At
our veneer factory, capacity increases of more than 100% are expected to come
online in Q2. In tandem, scaling up of production provides confidence that the
business should, when there is a marked improvement in shipping availability,
achieve improvements in margins through economies of scale.

 

With the exception of a three-month over-run in the commissioning of the first
of two veneer lines purchased during 2021 due to the delayed arrival of parts
into the country, the production team has delivered on expectations on all
fronts. Looking forward to 2022 we recognise the need to adjust to the 'new
norm' of Covid-related disruption and will plan and continue to adapt
accordingly. The cadence of our transition to higher levels of production for
2022 is materially dependent on external logistical factors such as the
availability of containers and re-opening of shipping routes which will
influence the timing of our ability to monetise the anticipated increase in
production.

 

The impact of the pandemic continues to cause delays and disruption to
container availability, port operations and inland logistics with local
restrictions, worker shortages, port strikes and overflowing storage
facilities leading to complicated handling and congestion.  A further
resulting impact for companies reliant on container networks for day-to-day
trade has been an increase in freight costs with average global rates having
more than doubled in 2021. High levels of demand for our products and the
resulting increase in prices largely compensated for these additional
logistics costs allowing the group to maintain the significantly increased YOY
margin expansion reported at the half year.

 

Overall shipments of our own production from Gabon increased 50% YOY but Q4
sales were restricted particularly in October and November when very few
containers were shipped owing to diversion of ships, limited container
availability, strikes at the Libreville port and Covid-related constraints to
port access. These delays contributed to a larger than expected inventory
build-up and as a result we took the decision, whilst continuing with veneer
production, to curtail production at the sawmill in November. Following an
improved flow of shipments in December normal production has resumed in early
January 2022. We anticipate unwinding the excess inventory during H1 2022 most
of which was - at the end of December - either already in containers at the
port or in warehouses close-by. Shipping continues to present great challenges
and port operations remain constrained by strike activity there, as well as by
the recent re-imposition of Covid testing requirements.

 

However, during this period we have taken time to ensure that capital projects
have proceeded and maintenance work and layout changes have been prioritised.
To circumvent logistical bottlenecks we have also secured new storage
facilities in Libreville close to the port, thereby assisting in more rapid
extraction when containers and shipping are available.  The timing of the
ongoing capital expenditure coupled with the lower number of containers
shipped has exacerbated the short term pressure on our cashflow.  We are
budgeting further cash Capex of c$1.1m for the current year which we will seek
to ensure matches improved cashflow from operations.

 

The process for FSC certification for the Group is proceeding on target and Q4
progress has laid further foundations to achieve this objective. The Group
sees this certification as an important element in its continued drive and
focus on quality and sustainability, as well as ensuring that its products are
sold to a wider, better-margin market than is currently possible.

 

Housing shortages and growing urbanisation trends are expected to drive
continued growth in global demand for sustainably sourced timber construction
materials, which already account for 60% of use. With versatile sawnwood and
veneer production capabilities in Gabon, and an extensive network of trusted
third party suppliers, Woodbois is well positioned to service the growing
global timber market with a diverse range of sustainable African hardwood
products.

 

Once the Company's 2021 results have been audited and the Board has considered
the results of Q1 2022, the Board will be better placed to determine the
timing and amount of any maiden dividend, but it is no longer expected to
commence this calendar year for the reasons highlighted above.

 

Carbon Division

 

Important policy changes and shifting corporate attitudes have confirmed the
critical role voluntary carbon markets have to play in the decarbonisation of
the global economy. On 13th November 2021 World Leaders adopted the Glasgow
Climate Pact, providing new clarity and confidence around the future of carbon
markets.

 

The result has been a record year for both the Compliance and Voluntary
markets. The EUA price hit an all-time high of €91/tonne in December, whilst
voluntary Nature-Based Global Emission Offset (NGEO) prices reached $15/tonne.

 

With over 3,000 of the world's leading companies now committed to achieving
net-zero, the demand for high quality verified offsets is overtaking supply.
Available credit inventories, particularly for nature-based offsets, are
falling quickly providing an attractive market opportunity for developers to
implement new large-scale projects.

 

Having been accredited by the Government of Gabon to attend COP26, Woodbois
subsequently submitted a formal application to the Gabonese Government
outlining a comprehensive plan for a large-scale reforestation project in the
country. In addition, the team is continuing positive discussions with
representatives of other African governments after a successful series of
introductory meetings at COP26 in Glasgow.

 

Commenting on today's announcement, Executive Chair Paul Dolan said:

 

"The unaudited 2021 financial metrics detailed above, including doubling of
gross profit margins, a near trebling of YOY gross profit and our first-ever
positive EBITDAS, illustrate the progress made by the business during 2021 and
provide a solid base for future profitable growth. The substantial additional
hectarage purchased in Gabon in August more than satisfies raw material input
requirements at our growing factories, allowing the Company to benefit from
the elevated levels of inflation now being experienced in many of our target
markets.

 

Based on the current outlook, we are confident in the ability of the Company
to profitably deliver on increased levels of production, particularly in
higher margin segments such as veneers and hardwoods.

 

Whilst 2021 produced a respectable outturn, our growth in Q4 was impeded by
lack of containers, with consequent inventory build. We have been working hard
to secure enhanced and sustained export capacity for H1 2022 as this will be
an important determinant of our growth rate and cash generation.  Whilst this
uncertainty exists we have felt it prudent to ensure we have sufficient
liquidity for our forecast current needs. We are very grateful to our two
largest shareholders for acknowledging the Group's progress and recognising
the effects of the uncertainties created by the unprecedented disruption to
global sea freight in providing the standby facilities for the Group. We are
also looking at ways to fund accelerating our growth and this includes
reviewing our interests in Mozambique.

 

As well as aiming to increase production and profitability in 2022, we aim to
become recognised as a reference point for responsible forestry management.
Our ongoing investment in equipment, processes and people are made with the
intention of ensuring that we are uniquely placed to grow shareholder value
while forging a position of leadership in the sustainable African hardwood
sector."

 

 

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").

 

Enquiries:

 

 Woodbois Limited

 Paul Dolan - Executive Chair                      + 44 (0)20 7099 1940

 Federico Tonetti - CEO

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

 Henry Fitzgerald-O'Connor

 James Asensio

 Thomas Diehl

 Celicourt Communications (IR/PR)                  +44 (0)20 8434 2643

 Mark Antelme                                      woodbois@celicourt.uk (mailto:woodbois@celicourt.uk)

 Jimmy Lea

Background on Woodbois

 

Woodbois Limited (AIM:WBI) is an African-focused forestry company, divided
into three distinct, but highly complementary divisions comprising the
production and supply of sustainable African hardwood products, the trading of
hardwood and hardwood products, and a reforestation and carbon credit
division.

 

Woodbois' forestry division has production facilities in Gabon and Mozambique,
managing a total of c470,000 hectares of natural forest concessions. The
trading division comprises a highly experienced team of timber specialists,
who source and supply sustainable timber to a global customer base. Its
proprietary technology developed in house, captures, stores and presents data,
providing a matching engine to build scale and optimise trading opportunities
with its global customer base.

 

The Company's carbon sequestration and trading division was formed in March
2021 and aims to generate voluntary carbon credits for corporate partners
through the delivery of large-scale reforestation projects.

 

The Company's focus on the transparency and sustainability of its timber
operations has been recognised by The Zoological Society of London, which
ranked Woodbois joint sixth in its Sustainability Policy Transparency Toolkit
('SPOTT'') ESG policy transparency assessments for the worldwide timber and
pulp industries for 2021.

 

Please follow the Company on Twitter: @WoodboisLtd

 

 

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