Higher harvest volume, increased production volumes, higher yield
The harvest volume for logs was 184 200 m3, 18 % higher than in the previous year. The sawmill processed 164 400 m3 of wood, 5.8 % more than in the previous year. PW Amazon was once again able to increase yield. This resulted in an 11.5 % higher sawn timber production of 38 300 m3 in total (previous year: 34 350 m3). The production year began in mid-January. The annual maintenance work was carried out in stages, and no sawmill operations were interrupted at any time.
In 2020, harvest activities were impeded in several ways. The permit for the second part of our forest areas came 2½ months late. This was due to the switch from IBAMA to IPAAM (both Brazilian forestry authorities) and their lack of personnel due to the pandemic. This meant that we first had to put the harvesting teams on leave and then reinforce them in October, which meant additional costs. In addition, early heavy rains starting in November prevented us from transporting the harvested logs out of the forest in a timely manner. Of the total harvest volume, about 30 000 m3 is still in the forest and cannot be evacuated until June 2021. As a consequence, we will reduce production capacity somewhat in the first half of the year and then make up for it in the second half.
At the sawmill, the measures to increase capacity had a positive impact, and we were able to use the increased capacity for cutting products for the local market. A follow-up action by the environmental authorities together with the federal police brought the illegal timber trade in our region to a halt. This situation gave us the opportunity to process and sell timber species that are not suitable for export. This also accounts for the shift from export to local sales. The average prices for the local market are far below the export prices. However, we were partly able to make up for this because of higher yields. Thanks to the additional harvest of other tree species, we exceeded our planned harvest volume by 7 000 m3.
The negotiations on private concessions to expand the harvest areas were intensified and partially concluded. The gaps until the second rotation, which will start in 2029, have accordingly been closed. In the second half of 2021, we expect state concessions to be auctioned. We are interested in acquiring additional concessions and increasing capacities in timber processing. In the past fiscal year, we were also able to settle minor legal disputes with alleged landowners in our favour.
Over the past fiscal year, we were largely able to keep our Covid situation under control. But while most of the cases were mild, we unfortunately had two serious cases resulting in fatalities. We extend our deepest condolences to the family members. In the Amazon region in particular, there is a lack of medical care, and PW Amazon has accordingly in several cases supplied the hospitals with relief materials, including urgently needed oxygen.
Being able to increase productivity and profitability in such an exceptional situation demands everything from the management and staff. We are very grateful to have this team in Itacoatiara and thank them all for their tremendous dedication, especially during this challenging and difficult time.
The investment volume in Brazil was only about EUR 0.3 million. This was spent on renovation measures at the sawmill, including additional buildings and transport equipment.
The local currency (BRL) fell in value by about 24 % against the euro. 75 % of sales were made in EUR, 10 % in USD, and 15 % in BRL, while nearly 100 % of costs are in BRL. This had a positive currency impact overall on the consolidated income statement. The sales and costs development at PW Amazon must be interpreted in this context.
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 continues to be a great challenge and also entails greater complexity for our operational activity. Our ongoing task is to establish and promote lesser-known and lesser-used timber species on the export markets, to examine their areas of application and to increase their familiarity. On the local market, prices remain very low, and transport costs to the populated areas in the south of the country are high. There is also a lack of awareness in regard to legally produced timber, and we are competing in the domestic market with illegally harvested and therefore cheaper sawn timber. As a consequence, our competitiveness on the local sales market remains limited, but it improved thanks to actions taken against the illegal timber trade. We regularly gain new customers for use of lesser-known wood species in Europe, the United States, and Asia. Increasingly, we are successful in educating customers, persuading them to buy these timber species, entering into promising partnerships, and opening up markets for products with specific applications or in connection with the special features of the wood species.