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 capital¹ 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:

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").