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Lower earnings in the first half of 2020
In the first half of 2020, Group sales amounted to EUR 23.1 million, and earnings before interest and taxes (EBIT) amounted to EUR –0.4 million or –1.9 %. Despite sales growth of 1.9 %, this represents a reduction in EBIT of EUR 1.8 million compared with the same period of the previous year. Along with other influences, the impact of the Covid-19 virus on operations, but also on sales markets, caused this drop-in earnings. At the veneer plant in Gabon, production could not resume as scheduled in January due to delays in technical maintenance. Strikes and transport problems also interfered with deliveries within Gabon. The lack of margins and the loss of production had a severe impact on EBIT for the first half of the year. The sawn timber volumes of all sawmills were about 2.3 % lower than in the previous year, while the production volumes of the veneer plant fell by only about 3.7 % despite the loss of production. Operations in Brazil developed positively in line with expectations, and the exchange rate also developed to our advantage. The Group’s net result was EUR –2.3 million (previous year: EUR –0.2 million). The generated cash flow enabled further investments in productivity. Debt remained at the year-end level. Working capital fell by about EUR 2.4 million but is still too high at 31.9 % of sales. Barring governments having to impose new Covid-19 lockdown measures, the outlook and expectations for 2020 as a whole is cautiously positive, given that the second quarter ended at least with a breakeven result.
|in EUR million||30.06.20||30.06.19||Index||Change|
|Net Sales Precious Woods Group||23.1||22.7||101.9%||+0.4|
|Net Sales Precious Woods Gabon||15.8||13.8||114.4%||+2.0|
|Sawmills in Gabon||12.0||10.7||112.1%||+1.3|
|Veneer plant in Gabon||6.3||4.8||132.0%||+1.5|
|Net Sales Precious Woods Amazon||6.2||6.3||98.5%||–0.1|
|Net Sales Precious Woods Trading||1.4||2.7||51.2%||–1.3|
The exchange rate effect on sales was -0.7 % compared to the same period last year.
Net sales group
The markets’ development was extremely volatile in the first half of 2020. The worldwide lockdown led to delays in acceptances and payments, and in some cases, shipment was no longer possible. This had a negative impact on cash flow. In general, there was pressure on prices because customers were very reluctant to place orders. The first easing of the situation occurred in the Chinese sales markets, but the situation is still unstable. The crisis has affected us not only on the sales side, but also in the procurement of maintenance and replacement material, most of which comes from Europe or Asia. Timely procurement was not guaranteed due to supply chain interruptions, leading to delays and significant additional costs. However, there was also a positive effect on the cost side: all costs incurred in BRL led to a lower value by about 20% in the consolidated accounts, given that the Brazilian real suffered massively from the crisis. But, this could compensate only partially for the overall negative effect.
The current order volume allows us to produce on a continuous basis, but unfortunately, we too are at times understaffed and have to send individual teams into quarantine on health grounds. In both Gabon and Brazil, we instituted the Swiss standards for hygiene rules early on, even though they were not yet required locally. Despite these measures, we still have employees today who tested positive, but fortunately have so far been spared serious illness. We exercise direct influence on compliance with all precautionary measures and support our local companies with all means at our disposal.
The Group’s gross profit was EUR 11.7 million, 12.3 % below the previous year period (EUR 13.4 million). The gross profit margin was 50.7 %, compared with 58.9 % in the previous year. The main reasons for this negative development are a lower sales price and additional personnel costs. The latter were incurred because we were only able to begin partial operations at the new sawmill in Gabon in April 2020. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR 1.6 million (previous year: EUR 3.1 million), corresponding to a margin of 6.7 %. Earnings before interest and taxes (EBIT) reached EUR –0.4 million (previous year: EUR 1.3 million) and a margin of –1.9 %.
The financial result remained unchanged at EUR –1.3 million (previous year: EUR –1.3 million). The current interest charge amounted to EUR 1.3 million (previous year: EUR 1.1 million), due to the investment volumes in Gabon since 2019. The net result was EUR –2.3 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 30.0 % on the reporting date (end of previous year: 42.0 %). The correction of land values in Brazil undertaken in 2019 is accounted for in BRL. The exchange rate fell by 26 % compared with the end of the year, which had a direct effect on equity. Working capital at EUR 14.3 million was EUR 2.4 million below the level at the end of the year. Inventories of logs, veneer and sawn timber increased by EUR 4.3 million. At EUR 7.3 million, trade receivables were EUR 2.8 million higher than at the end of the year, because deliveries picked up only towards the end of the second quarter. Trade payables increased by EUR 0.9 million. Overall, net debt at EUR 41.5 million remained at the level at the end of the year.
Operating cash flow was EUR 3.5 million (previous year: EUR 3.5 million). This includes the change in net working capital of EUR 2.1 million (previous year: EUR 1.5 million). Investments amounted to EUR 2.6 million (previous year: EUR 1.7 million).
A few brief remarks summarizing the results in the individual companies: