Operational successes despite difficulties
The harvest volume in 2022 was 228 900 m3, a decline of 2.1 % from the previous year (233 700 m3). The considerable inventory of logs at the end of 2021 permitted a reduction of the harvest volume. In one of the three harvesting zones we currently manage, the main harvest is the hardwood azobé. We built a specialized sawmill for this wood species in 2020. The azobé site is difficult to access, and we were unable to harvest the entire volume in a timely manner. The sawmills in Bambidie processed a total of 150 700 m3 of logs, an increase of 1.1 %. Sawn timber production amounted to 54 900 m3 (previous year: 53 500 m3) – an increase of 2.7 %. Yield rose by 0.5 percentage points, corresponding to an increase of 1.6 %.
As we already communicated in November 2022, the fiscal year was overshadowed by above-average increases in the cost of diesel fuel. This is relevant for our forestry machinery but especially for the power generation for our facilities in Bambidie. Starting the middle of 2022, prices increased every month, peaking at almost double the 2021 level by the end of the year. Because we could not assume that this situation would ease and we had to expect additional costs for a full fiscal year of approximately EUR 6 million, we decided to undertake a partial restructuring. In the 2022 fiscal year, we recorded direct additional costs of EUR 1.7 million and indirect additional costs of EUR 0.7 million (mainly transport costs) in this regard. Due to the cost increases, we also had to assess the economic viability of cutting different wood species, and we consequently limited ourselves to processing fewer species. The closure of one of the three sawmills at the Bambidie site was a necessary step. We can achieve further cost reductions by reducing camp operations. Most of our workforce will now live in the nearby city of Lastoursville, and we will have to maintain only part of our village infrastructure. The restructuring should be completed on schedule by the end of June 2023. The number of employees will be reduced by about 140. Provisions for these measures in the amount of EUR 2.3 million were made in the 2022 accounts.
As in previous years, we suffered greatly from obstacles beyond our control. Road conditions did not always allow deliveries to the port, and rail capacity was also not expanded as promised. Unfortunately, the latter was even further reduced because more rail cars were made available to the mining companies. This led to additional costs because we had to switch to truck transport. We were able to ensure the supply of logs to our veneer plant at all times.
The inventory for the new forest management plan for the years 2025 – 2049 is still underway and will be completed in mid-2023. By the end of 2023, we will present our plan to the authorities. The plan will form the basis for maintaining the existing concession. All other requirements have already been met, and therefore we are optimistic to secure the continuation of our operation. We need this secured commitment in order to move forward with investments in energy production as well as sawn timber processing and value creation. Installing a power plant (solar or biomass) is essential given current diesel prices, as well as an economic and ecological must. The processing of additional tree species also offers potential if revenues and operating costs remain in balance. This also provides better support for low-impact forestry, despite the increase in harvest volumes. The changed conditions for business in Gabon also call for accelerated investment in further processing of sawn timber. Local processing of sawn timber is becoming more and more important strategically, also to increase our margins, reduce costs, and minimize transport distances.
PW Gabon’s total investments in the amount of EUR 2.1 million were used for buildings (EUR 0.3 million), forestry machinery (EUR 0.8 million), vehicles (EUR 0.6 million), and inventory (EUR 0.4 million).
In the first quarter of 2022, we had to overcome several challenges in industrial operations. These ultimately led to a staffing change in the sawmill management. Productivity in the sawmills and in the sharpening plant subsequently increased, and production was continuous and nearly disruption-free. The planned maintenance work was carried out as scheduled. At the end of the year, however, we had to shut down all operations because a landslide interrupted the rail line and the supply of diesel could no longer be guaranteed. We therefore decided to carry out our 2023 annual maintenance work already in January, so as not to affect production again. At the beginning of February 2023, we were able to resume full operations.
The VAT credit with the Gabonese government decreased by EUR 0.5 million to EUR 1.9 million. We have recorded continuous payments since August 2022 and expect the balance – which is still high – to fall to a tolerable level over the course of the year. We were able to finance investments from cash flow or with bank loans from local institutions. Net debt even fell slightly by EUR 0.6 million. Liquidity remained very tight due to delivery delays and the associated late realization of sales, as well as increased costs from operating activities.