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:

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