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Annual Report 2018
Annual Report 2018
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Annual Report 2018
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Table of contents for the Annual Report 2018 report

Operational review
Key FiguresTo our shareholdersAbout Precious Woods
VisionFocus on economic, social, and environmental added valueProducts and marketsGlobal and economic challenges in a dynamic environmentA pioneering role – more than just certified sustainable managementStrategy: Market orientation and continuous optimization of the value chainMedium term goals: Sustainable growthManagement organization with increased market orientationMilestones Precious Woods
Group results
Income statementBalance sheet
Brazil
Higher harvest volume – increased production volumes with higher yieldContinuous efforts on legacies and exceptional factorsPrecious Woods Amazon in briefSocial and environmental sustainabilityOutlook for 2019
Gabon
Productivity and profitability have sufferedSetbacks can be overcomeReport on further progress in social and environmental sustainabilityPrecious Woods Gabon in briefOutlook for 2019
Trading
Precious Woods Trading in brief
Carbon & Energy
CERs from Brazilian biomassEmission trading together with myclimatePrecious Woods Carbon & Energy
Sustainability
Selective wood utilization is not synonymous with sustainable forestrySustainability goals of the UN4 : 1330 000 000 tCFauna / FloraPrecious Woods Amazon closely connected with the local populationPrecious Woods in Gabon – gentle use and wildlife protectionIllegal logging threatens certified timber trade and sustainable developmentSustainability as our entrepreneurial principleOpportunities for FSC certified timberThe role of forestry in the climate change debateSustainability Advisory Committee (SAC)
Corporate Governance
1. Group structure and shareholders2. Capital structure3. Board of Directors4. Group Management5. Compensation, shareholdings, loans6. Shareholders’ rights of participation7. Changes of control and defense measures8. Auditor9. Information policy
Shareholder information
Share capitalEquivalent to 100 sharesStock market listingShare register information as of 1 January 2019Company headquartersStock price development
Financial Report
Precious Woods Group financial statements
Consolidated statement of financial positionConsolidated statement of profit or lossConsolidated statement of comprehensive incomeConsolidated statement of changes in equityConsolidated statement of cash flowsNotes to the consolidated financial statements
1. Basis of presentation and accounting policies2. Financial risk management3. Trade and other receivables4. Inventories5. Prepayments6. Property, plant and equipment7. Forest, forest improvements8. Intangible assets9. Investment in associates10. Non current financial assets11. Trade and other payables12. Financial liabilities13. Provisions14. Financial instruments by category15. Share capital16. Related party balances and transactions17. Employee benefits18. Net revenues from contracts with customers19. Other production costs20. Depreciation, amortization and impairment21. Direct and indirect labour costs22. Other operating income and expenses23. Financial income and expenses24. Leasing25. Earnings per share26. Contingencies27. Financial information by segment28. Major shareholders29. Income taxes30. Currency translation rates31. Divestments and acquisitions32. Subsequent events33. Approval of financial statements and dividends
Report of the statutory auditor on the consolidated financial statements
Precious Woods Holding Ltd financial statements
Balance sheets as of 31 December 2018 and 2017Statements of income 2018 and 2017Notes to the financial statements of Precious Woods Holding Ltd
Essential accounting and valuation principles1. General2. Authorized share capital3. Conditional share capital4. Investments in subsidiaries5. Other short term receivables against group6. Other short term interest bearing liabilities7. Long term interest bearing liabilities8. Board and Executive compensation9. Depreciation, amortization and impairment10. Major shareholders11. Pledged assets / other securities12. Other note / Full time employment13. Other note / Residual amount of leasing obligations14. Other note / Significant events after the reporting date
Report of the statutory auditor on the financial statements
Additional information
Contact addresses
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2. Financial risk management

In the normal course of business the Group is exposed to changes in currency exchange rates, financing risk, changes in interest rates and credit risks.

Precious Woods financial risk management seeks to minimize potential adverse effects on financial performance.

The Group may use derivative financial instruments to eco­nomically hedge financial risks. In the reporting period, Precious Woods did not apply hedge accounting.

Risk management is carried out by the Group finance department under conditions approved by the Board of Directors and Group Management. The Group Management takes decisions covering specific areas, such as foreign exchange risk, on a case-by-case basis.

Market risk

The market risk includes interest rate risk, foreign exchange risk and equity price risk.

Interest rate risk

Precious Woods has no significant interest-bearing assets. The Group’s interest rate risk arises from borrowings. Borrowings issued at variable rates expose Precious Woods to cash flow interest rate risks. Group borrowings are denominated in CHF, BRL, EUR and XAF.

Management’s policy is to maintain its borrowings in fixed rate instruments. There was no material variable interest rate borrowing on 31 December 2017 as well as on 31 December 2018.

Foreign currency risk

Precious Woods operates internationally and is exposed to foreign currency risk arising from various currency exposures. The XAF is in a fix relation to the EUR. Most of the sales out from Gabon are denominated in EUR and all cost in XAF. The sales out of Brazil are denominated in EUR and USD, the cost are in BRL. Therefore the currency risk for the local books is given. Foreign currency risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency. To manage their foreign currency risk arising from future commercial transactions the Group may use forward contracts, transacted by the Group finance department.

The sensitivity is based on the exposure on 31 December based on assumptions that have been deemed reasonable by Management, showing the impact on profit or loss before tax as well as on equity. The Group uses historical volatilities of the currency pairs below to determine the reasonable shift.

The following table summarizes the Group’s sensitivity to currency exposures regarding the positions in the statement of financial position of the main currencies on 31 December:

    31.12.18   31.12.18   31.12.18   31.12.17   31.12.17   31.12.17
in thousand EUR   Reasonable
shift
  "Impact" on profit
or loss before tax
  "Impact"
on equity
  Reasonable
shift
  "Impact" on profit
or loss before tax
  "Impact"
on equity
EUR/CHF   +/–10%   +/–278   +/–2 153   +/–10%   +/–82   +/–2 149
USD/CHF   +/–10%   +/–39   +/–971   +/–10%   +/–9   +/–928
USD/BRL   +/–15%   +/–5   +/–1 206   +/–15%   +/–3   +/–1 332
CHF/BRL   +/–15%   +/–0   +/–6 798   +/–15%   +/–0   +/–6 323
XAF/CHF   +/–10%   +/–0   +/–1 486   +/–10%   +/–0   +/–755

All the loans in Precious Woods Holding are denominated in CHF or EUR. The situation will be monitored very closely when it comes to a due date of a loan whether it shall be replaced or repaid in CHF or EUR and hedged before.

Price risk

Precious Woods is exposed to equity securities price risks because of unlisted investments held by the Group and classified as measured at fair value through OCI or at fair value through profit or loss. For details about the exposure please see Note 10.

Liquidity risk

Liquidity risk management is centralized at the Groups head office and monitored through cash-flow forecasts. The sub­sidiaries provide regular forecasts based on the expected cash-inflows and -outflows. Excess funds are pooled in accounts managed by the holding company. Cash deficits are funded by the holding company in general. Group administration raises the majority interest-bearing debt centrally. The Group seeks to reduce liquidity risks through sufficient cash reserves and credit facility arrangements.

The following table analyses the Group’s remaining contractual maturity for financial liabilities and derivative financial instruments.

in thousand EUR   Less than 1 year   Between 1 and 2 years   Over 2 years   Total
31 December 2018                
Trade and other payables   13 983   –   –   13 983
Financial liabilities   12 316   3 430   21 494   37 240
Non-derivative financial liabilities   26 299   3 430   21 494   51 223
in thousand EUR   Less than 1 year   Between 1 and 2 years   Over 2 years   Total
31 December 2017                
Trade and other payables   12 009   –   –   12 009
Financial liabilities   9 699   2 046   21 674   33 419
Non-derivative financial liabilities   21 708   2 046   21 674   45 428
Credit risk

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including out­standing receivables and committed transactions.

Where banks and financial institutions are concerned, generally independently rated parties with a minimum rating of “A” are accepted. Precious Woods has one main relation with a bank, which has a rating of “A”. Most of the sales are CAD (Cash Against Documents) or L/C (Letter of Credit) and if this does not apply and the customers are independently rated, these ratings are used. The Group has set up a policy to minimize credit risk and monitor its clients. Custo­mers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis. The maximum exposure to credit risk is represented by the carrying amount of each financial asset. The Group therefore monitors its accounts receivable at individual customer level by payment due date rather than the number of days from invoice date. No concentrations of credit risk are currently present. An allowance on bad debt is determined on both an individual and a collective basis. An individual allowance is determined when a customer disputes the amount due, or if legal steps have been taken to recover the overdue amount. Collective loss allowances are determined for all other amounts based on past experience. For detailed information see Note 3.

Capital management

When managing capital, Precious Woods’ objectives are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal structure to reduce the cost of capital. In order to reach these goals, Precious Woods issues new shares or sells assets to reduce debts. The mid-term target of the Group is to have an equity ratio of >40 %. Capital is consi­dered the equity attributable to holders of Precious Woods Holding. There were no changes in the Group’s approach to capital mana­gement during the year.

Guarantees and pledges of assets

Precious Woods Tropical Gabon Industrie has pledged buildings in the amount of EUR 3.5 million (2017: EUR 3.5 million), Precious Woods Compagnie Equatoriale des Bois has pledged machinery and equipment in the amount of EUR 1.1 million (2017: EUR 1.1 million) and leased property and plants by EUR 3.7 million (2017: EUR 3.4 million). Mil Madeiras Preciosas has pledged vehicles in the amount of EUR 0.4 million (2017: EUR 0.0 million). Precious Woods Holding has no pledged assets, but used land in Brazil in the amount of EUR 23.1 million in connection with loans (2017: EUR 22.2 million).