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Higher harvest volume – increased production volumes with higher yield
The harvest volume was 154 400 m3, 19.1 % more than in the previous year. The sawmill processed 121 900 m3 of logs, 1.3 % more than in the previous year. The yield was increased by 2.3 percentage points. This resulted in a 14.4 % increase in sawn timber production, namely 25 820 m3 (previous year: 22 620 m3). The production year began in mid-January and all maintenance work was carried out in December. This means that there was no production in December at either PWA or BK Energia.
Due to the actions taken by the Federal Police of Brazil against the illegal timber trade in the Amazon, the export of containers at the port of Manaus was severely impeded until February 2018. After that it was possible to export again regularly. In February 2019, all of our blocked containers were finally released; none of the 64 retained containers gave rise to complaints. The additional costs resulting from this delay amounted to approximately EUR 0.9 million. Precious Woods is demanding reimbursement of these expenses from the government. Harvesting activity, which started in June 2018 and ended in December 2018, took place in two areas. The ministry responsible for forestry introduced new software to monitor the traceability of the flow of goods. This system is designed for small businesses and our extensive data could not be reconciled with it. This led to an unnecessary interruption of harvesting activity for one month in the second area. As a result, additional teams had to be recruited to make up for this backlog, resulting in additional costs of about EUR 0.3 million.
The investment volume amounted to about EUR 1.0 million. Half of this was for the expansion of the forest road network, and the remaining was used for machinery for forest and sawn timber production. Financing was secured partly in cooperation with local banks.
The local currency (BRL) fell by about 12 % against the euro. 85 % of sales are made in EUR, 10 % in USD, and 5 % in BRL, while nearly 100 % of costs are in BRL. This had a positive impact on the income statement.
Legal rules and our commitment to the sustainable use of tropical forests require our company in Brazil to harvest many different species of timber. This constitutes a great task and also entails greater complexity for our operational activity. Our ongoing challenge is to establish and promote lesser-known and lesser-used timber species, for export markets, to examine their areas of application and to increase their familiarity. On the local market, prices are very low, and transport costs to the populated areas in the south of the country are high. For that reason – and because we compete on the home market with illegally harvested timber, as well as cheaper sawn timber – our competitiveness on the local sales market is limited. We are therefore grateful that we are regularly able to gain new customers in Europe, the United States and Asia for the use of lesser-known timber species in the international market. Our experience has shown that we can convince the markets of the specific qualities of those species, which allows us to enter into promising partnerships.