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Temporarily difficult business environment resulted in lower sales and earnings

In the first half of 2019, Group sales amounted to EUR 22.7 million, and earnings before interest and taxes (EBIT) amounted to EUR 1.3 million or 5.9 %. This represents a slight decline in sales of 0.6 % and a reduction in EBIT of EUR 0.2 million compared with the same period of the previous year. Further delays in deliveries from Gabon reduced sales by about EUR 3.5 million, and the veneer plant even had to suspend work for 6 weeks. The lack of margins and the loss of production had a severe impact on EBIT for the first half of the year. The aggravated delivery conditions are consequences of “Kevazingogate” in Gabon, an operation initiated by the authorities against illegal timber trade and corruption, which has led to the interruption of production and delays in shipments. The sawn timber production of all sawmills increased by about 10 %, while the production volumes of the veneer plant fell by about 25 %. The operations in Brazil developed positively and in line with expectations. The Group’s net result reached EUR –0.2 million (previous year period: EUR 0.2 million). The generated cash flow enabled further investments in productivity. External debt was also reduced. Working capital remained at the excessively high level of the end of the year. The outlook and expectations for 2019 as a whole remain positive.

in EUR million   30.06.19   30.06.18   Index   Change
Net Sales Precious Woods Group   22.7   22.8   99.4%   –0.1
Sawmills in Gabon   10.7   12.0   88.8%   –1.3
Veneer plant in Gabon   4.8   6.5   74.4%   –1.7
Net Sales Precious Woods Gabon   13.8   15.7   87.9%   –1.9
Net Sales Precious Woods Amazon   6.3   4.9   128.7%   +1.4
Net Sales Precious Woods Trading   2.7   2.4   112.7%   +0.3
The exchange rate effect on sales was merely 0.1 % compared with the same period of the previous year.

Extraordinary impediments have arisen in Gabon since mid-May. The government launched a large-scale campaign against the illegal timber trade. This has led to personnel changes in the ministries and to various dismissals in the customs authorities. The campaign became known as “Kevazingogate”, referring to a protected wood species that has been felled, processed and shipped by some companies. As a consequence, both the domestic transport of logs and the clearance of timber products at the port were blocked. The supply of our veneer plant with logs was no longer possible, and operations had to be suspended for about 6 weeks. Similarly, veneer in stock could not be shipped. Only sawn timber from our sawmill was able to be cleared, given that customs clearance took place already near the concession. In the meantime, new staff has been appointed in the ministry responsible for forests. One of the first actions was that sustainably operating and FSC-certified companies are henceforth to receive preferential treatment regarding customs clearance.

The Group’s gross profit was EUR 13.4 million, 1.9 % below the previous year period (EUR 13.6 million). The gross profit margin was 58.9 %, compared with 59.7 % in the previous year. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR 3.1 million (previous year: EUR 3.9 million), corresponding to a margin of 13.6 %. Earnings before interest and taxes (EBIT) reached EUR 1.3 million (previous year: EUR 1.5 million) and a margin of 5.9 %.

The financial result was EUR –1.3 million (previous year: EUR –1.4 million). The current interest charge was an unchanged EUR 1.1 million. The net result was EUR –0.2 million (previous year: EUR 0.2 million). Exchange rate effects on the net result amounted to EUR –0.1 million (previous year: EUR –0.1 million).

The equity ratio was 21.1 % on the reporting date (end of previous year: 21.6 %) and the working capital of EUR 15.7 million was EUR 0.7 million below the figure at the end of the year. Inventories of logs, veneer and sawn timber increased by EUR 1.8 million. This is due to the circumstances described above. At EUR 5.5 million, trade receivables were EUR 0.3 million lower than at the end of the year. Trade payables increased by EUR 0.5 million. Overall, net debt increased by EUR 2.3 million to currently EUR 34.1 million.

Operating cash flow was EUR 3.2 million (previous year: EUR 1.0 million). This includes the change in net working capital of EUR 1.5 million (previous year: EUR –1.5 million). Investments amounted to EUR 1.6 million (previous year: EUR 0.6 million).

A few brief remarks summarizing the results in the individual companies: