Income statement

Total income

The 2022 fiscal year was characterized by an attractive market situation, but also massive cost increases and more difficult operating conditions. Operating costs rose by approximately 10 % over the course of the year. Fuel prices in Gabon, for example, rose every month starting in July 2022, increasing by a total of nearly 100 %. They are still at a very high level. This resulted in direct additional costs of EUR 1.7 million and indirect additional costs of approximately EUR 0.7 million in 2022 for Precious Woods Gabon. For a full fiscal year, this would amount to additional costs of about EUR 6 million. We therefore had to take drastic restructuring measures. The one-off effects posted relate to personnel costs for the restructuring and the associated reduction in the number of employees from 780 to 630, along with additional depreciation expenses for one of the three sawmills and the camp at the Bambidie site. The two sawmills for Okoumé and Azobé continue to operate. Because transport capacities on the rail network were drastically reduced, we were increasingly dependent on trucks. This also led to additional costs in Gabon. We also recorded enormous cost increases for sea freight. Shipping costs per container remained at a very high level for most of the year in both Gabon and Brazil. This caused uncertainty, and customers waited before placing orders. The situation eased a bit in the last quarter of 2022, but only for shipments from Africa for Asia and Europe. In Brazil, sea freight costs are currently still at an all-time high.

Another new export certificate was introduced in Brazil, this time by the tax authorities. These measures led to delays in shipments and to additional costs for container handling. At times, the Amazon River carried so little water that shipments were possible only with delays. Fortunately, this never led to extended interruptions.

Despite all the difficult conditions, we achieved Group sales growth of about EUR 11.6 million or 21.3 % in 2022. The exchange rate effects of +2.8 % and the effect of the price/product mix of 7.5 % are primarily due to the sale of sawn timber in the international market. Conversely, the increased share of products sold in the local market in Brazil had a slightly negative effect on our average prices, reducing the price gains achieved in our export markets. Operations in Brazil achieved an increase in sales of EUR 4.0 million or 25.9 %. In Gabon, we achieved an increase in sales of EUR 4.6 million or 13.0 %. This is also due to the fact that all veneer sales of CPL are made through us. Trading sales of logs and sawn timber from Europe increased and amounted to EUR 6.6 million, 90.4 % or EUR 3.2 million higher than the previous year.

Operational development: Costs and market

The production volume of sawn timber in Brazil increased by 5.0 %. Yield decreased by 1.2 percentage points, due to the quality of the harvested logs. The harvest volume was 185 000 m³. Because of heavy rainfall starting in September, we were not able to transport the entire harvest volume to our site. The total volume of logs processed in the sawmill was 10.9 % higher than in the previous year. In terms of volume, sawn timber sales for the local market were at the previous year’s level, and sales for the export market increased by about 12.8 %. Sawmill capacity was again slightly expanded thanks to targeted investments, and good capacity utilization throughout the year led to an increase in profitability.

The sawmills in Gabon processed 1.1 % more logs and at the same time produced a total of 2.7 % more sawn timber. This was due to a higher yield of about 0.5 percentage points. Export sales increased by 6.7 % over the previous year, while sales on the local market stagnated at the previous year’s level. The inventories of logs and sawn timber in the sawmills fell slightly. If sufficient transport capacities had been available, we certainly could have reduced inventories significantly. Average prices achieved for sawn timber across the Group were about 7 % higher than the previous year. Slight downward price corrections were already noticeable in the second half of the year.

Our sales and distribution teams achieved strong customer loyalty and retention, even though we are not always able to ship or deliver on time because of delivery delays beyond our control of influence. We also see a general worldwide trend of increased demand for wood. This, and also the fact that we benefit from our reputation in sustainable forestry in the tropics, makes us optimistic and strengthens our market access and opportunities. An ongoing task continues to be the search for markets and applications for the approximately 50 different timber species that we process each year. With our dual certification and credibility, we have good arguments and a head start here, given that sustainability is playing an ever-greater role in the procurement of tropical timber. However, the major challenge remains to introduce even small quantities of lesser-known timber species on the markets and with customers. Europe continues to be our main sales market with a share of 63.8 %, followed by Asia with 13.8 %, Latin America with 13.5 %, Africa with 2.9 % and other countries with 6.0 %. The share in Europe fell by 3.6 percentage points.

Operational costs

Production costs increased disproportionately to sales growth. The weakness of the euro against the Brazilian real and the Swiss franc is reflected in both the income statement and the balance sheet. In euros, we recorded 17 % higher costs from Brazil and 7.5 % higher costs from Switzerland as a result of the exchange rates. Another cost driver was the development of purchased fuel in Gabon. The resulting cost increase amounted to EUR 2.4 million directly and indirectly. Consequently, operational costs increased by EUR 2.9 million over the previous year. Personnel costs rose by EUR 4.5 million or 24.5 %. Inflation-linked wage increases amounted to 6.5 % in Brazil and 1.5 % in Switzerland and Gabon. Personnel costs include restructuring provisions in the amount of EUR 0.4 million. Depreciation includes EUR 1.9 million of provisions relating to restructuring.

Operating result (EBITDA)

Financial result

Net result

Outlook for 2023

The operational progress achieved in recent years has laid the foundation for the further development of Precious Woods. We have improved our infrastructure, processes, competencies, and knowledge. Our strategic objective includes an increase in our managed forest areas in Brazil and Gabon, which has already been partially achieved. We also aim to invest in vertical integration in Brazil in 2023 to generate more margin. Negotiations for additional concessions are underway, and individual projects for the further processing of sawn timber are in preparation. For these projects, we depend on local financing opportunities that are in sight. We want to fulfil our mandate for profitable growth, even though external debt in relation to EBITDA is still very high. At the same time, the refinancing of existing loans remains a major challenge. We expect increased profitability in Gabon in 2023, in part because we recognized the restructuring effects in 2022. In Brazil we expect a higher operating result, mainly due to currency effects. We assess the market situation as positive in principle, even though uncertainties currently exist due to rising interest rates – which affect the construction industry – and restrained consumer sentiment. Building and using wood is and will remain a trend, also due to the potential and climate contributions that wood can make as a construction material. This development will include tropical timber and will make the potential visible. Because of these factors, we expect a positive development for the current fiscal year.