To our shareholders

Dear Shareholders

It was a great pleasure and honour to be given the opportunity to succeed Ernst A. Brugger as Chair of the Board of Directors of Precious Woods in May 2017. I have been working with this company for several years now, and although we see ourselves as an SME, the complexity of the company should not be underestimated. The challenges of our performance of services in the countries of Gabon and Brazil, the maintenance of our exceptionally high standards in the current business environment, and the constantly changing market requirements and customer needs always confront our company and our team with new challenges. Nonetheless, for me, for my colleagues on the Board of Directors, for all our managers, for more than 1 300 employees and I hope also for you as shareholders, Precious Woods means a multi­dimensional sense of purpose. This is our incentive, inspiration, and commitment.

A milestone achieved in terms of our economic goals

We concluded the 2017 fiscal year with a consolidated net profit of EUR 1.6 million and a return of 3.6 %. Thanks in part to an increase in sales by 8.9 %, earnings before interest and taxes (EBIT) rose by 118.9 %. At EUR 3.5 million or a margin of 7.8 %, EBIT was more than twice as high as in the previous year.

The positive net result is a milestone for the Group. It was a long and hard road that we had to travel since our acquisitions in the Netherlands and Gabon, the uncertain business environment in Brazil, the sales difficulties caused by the financial crisis and the associated consequences and challenges. Moreover, this year’s result is affected by setbacks at PW Amazon, which we will describe in detail in the corresponding chapter of this annual report. The current financial situation, our evident progress in combination with the stability of the management team, as well as the credibility and commitment of our company make me believe that this positive development is only the beginning. We have learned to deal with changes in policy and infrastructure and to act accordingly. Our core business is under control, we have strengthened our competence, and we are marketable and prepared for the future.

We are very grateful that Precious Woods is able to draw on an extremely committed, long-standing and competent team at the management level, in sales, at the holding company headquarters in Zug, as well as at the local companies in Gabon and Brazil. Thanks to all these dedicated individuals, we are not only able to look back on economic successes in 2017, but also to pursue our environmental and social goals with great consistency.

Strengthening our social and environmental goals

PW Amazon was the first company in Brazil to be certified according to FSC guidelines – already 20 years ago. In 2017 the fifth complete recertification took place, which we passed with flying colours. PW Gabon has been FSC-­certified since 2008 and also passed the external audit with top marks. In addition, we underwent certification according to the principles of the PEFC/PAFC in 2017. This sustainability standard is of a similarly high level compared to that of FSC and is preferred by some customers. The voluntary external audit according to defined standards underscores our awareness of sustainability and our efforts to achieve it. With this certification, we are also documenting our pioneering role in the sustainable management of tropical forests.

In many respects, our work and performance exceed the legal and social requirements defined by governments or NGOs. We are proud of this. Our firm conviction continues to be that the rainforest can be protected only by sustainable use and/or respective valorization, even if other models are offered for the protection of intact tropical forest areas and are also financed by attractive projects. We are convinced that in the end, a sustainably operating company is in an excellent position to achieve increased social responsibility, secure jobs, additional income for surrounding communities, social stability, and a future perspective for the local population, while at the same time taking into account the valuable and renewable resource of wood and the intact ecosystem in the tropical forests. That is our vision. And we are working on this vision with complete dedication.

We are working on the future

We will continue to strive to optimize our operating activities in Gabon, Brazil and the trading business. At the same time, we want to expand our activities. At the top of our priority list is the ability to contract new concession areas. This will enable us to multiply the positive and strong impact of our business activities and contribute to the protection of larger tropical forest areas. Our team has the experience, expertise and competence to take further growth or expansion steps in value added depth.

In addition, we intend to tackle other smaller projects that generate added value for our company and make productive use of our forests outside the forestry sector. But our core business will continue to be the timer operations, the management of tropical forests, as well as the use of fallow to run sustainable forest management and timber operations.

Outlook and thanks

Our reported result for 2017 and the existing optimization potential make us confident for the current fiscal year 2018. The investment projects in Gabon and the Amazon described in this annual report allow for a further increase in current operating activities. We also intend to invest in our hardwood processing capacities at the Bambidie site in Gabon. This investment must be ready for operations by 2020 so that the log volume and the corresponding product range can be cut and brought to market. This expansion investment is being carried out in parallel with the corresponding updates at the PW Amazon site.

The 2017 result is a success and motivation for the entire Precious Woods team. It boosts our morale and is proof that our activity is also substantiated in financial terms. This result was made possible by the enormous commitment of all those involved in the success. As mentioned above, this includes numerous individuals both at the holding level and in the operating companies – in particular the valuable and responsible work of our CEO, CFO, and Delegate of the Board of Directors, Markus Brütsch. The foundation of our success is based on the contributions, commitment and perseverance of all employees. I would like to express my warmest gratitude for this and for them all continuing to work for our success story.

I would also like to thank my colleagues on the Board of Directors for their excellent, open, and rewarding cooperation. They make very important contributions, not only for me and for the Board of Directors, but also for our contacts in Gabon, Brazil, and Switzerland.

And finally, our most important thanks go to our shareholders. Thank you very much for remaining loyal to us even during difficult times and for your continued support. We build on the trust that you will support us in our vision of a truly sustainable enterprise along the three dimensions of economic, environmental, and social responsibilities. Precious Woods still has a great deal of potential – thanks to your commitment, we will make this visible.

Yours faithfully,

Katharina Lehmann

Chairwoman of the Board of Directors