Negative development of productivity and profitability

The harvest volume in 2019 was 237 100 m3, a decline of 2.6 % from the previous year (243 500 m3). The sawmills in Bambidie processed 120 200 m3 of logs, a reduction of 3.8 %. Sawn timber production amounted to 42 300 m3 (previous year: 41 750 m3). Government action against the illegal timber trade and corruption made delivery more difficult in the first half of the year. In addition, the at times insufficient rail capacity made it difficult to deliver logs and sawn timber to Libreville and to supply diesel to Bambidie. As a consequence, our operations could no longer be maintained for over a month, given that both our motor vehicles and machines and the installed power generators run on diesel. The road was intermittently not passable, and various strikes at the customs authorities also affected our everyday work. This led to a delay in deliveries, high inventory levels, but also to more difficult import conditions for components for the new hardwood sawmill as well as for spare parts for ongoing operations. Consequently, maintenance work and commissioning of the new sawmill was delayed.

The veneer plant (TGI) processed 48 700 m3 (previous year: 54 600 m3) with increased yield. Overall, the production volume of veneer decreased by 16.7 % in 2019. The market environment is currently undergoing major changes, given that numerous sawn timber and veneer producers have settled in the newly formed industrial zone in Gabon and are increasingly seeking and finding access to the European market. Some of these are already FSC- or PEFC-certified. This means increased competition in the sales markets for sawn timber and veneer, but also opportunities in the sale of FSC-certified logs within Gabon.

PW Gabon’s total investments in the amount of EUR 5.7 million were used for buildings (EUR 2.4 million), forestry machinery (EUR 1.4 million), homes for employees and their families in Bambidie (EUR 0.5 million), and sawmill machinery (EUR 1.0 million). Construction of the new sawmill for Azobé sawn timber started in 2019 and will start production in spring 2020. From that time on, we will harvest more hardwood in our concessions than we would be able to process without the new sawmill.

The team in Gabon remained stable, and the fluctuation among the foreign managers was in line with the usual pattern. Several people have already been added in light of the construction and operation of the new sawmill.

The input tax credit with the Gabonese government amounts to EUR 4.5 million and is similar to the previous year (EUR 4.7 million). The investments made could be financed with bank loans from local institutions. However, the delays in sales and the increased costs from business interruptions again led to a tight liquidity situation. Inventories increased by about EUR 2.5 million and tied up liquid assets. We assume that the situation will ease, even though this was not yet the case at the beginning of 2020. For the first time, the government is acting in a coordinated manner among the various ministries, weaknesses in infrastructure and processes have been identified, and measures have been taken. The incipient fight against corruption will cause further difficulties in the short term, given that government authorities are hiring mostly new staff and changes in operational procedures are being planned, but have not yet been successfully implemented. We are confident, however, that progress will be visible and tangible in the first half of the year.