Operational successes despite difficulties
The harvest volume in 2023 was 162 800 m3 (previous year: 228 900 m3), a decline of 28.9 % from the previous year. Alongside a partial reduction in the availability of fuel, this decline is mainly due to the fact that the harvest volume was reduced in time in anticipation of the market situation, with the aim of saving costs and preventing inventory build-up. 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 sawmills in Bambidie processed a total of 92 150 m3, a decrease of 38.9 %. Sawn timber production amounted to 36 900 m3 (previous year: 54 900 m3) – a decrease of 32.8 %. Yield rose by 3.7 percentage points, corresponding to an increase of 10 %.
As the worldwide market situation for timber deteriorated, the baseline situation for our Gabonese timber worsened as well. Prices and order volumes began the year at roughly the same level as the previous year, but fell dramatically through mid-2023. While the downward trend came to a halt in late summer and a slight easing was observed towards the end of the year, the market situation will remain tense in 2024, even though incoming orders at the beginning of 2024 continued the slight upward trend. The 2023 fiscal year was again 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. We can assume that fuel prices will fall slightly, but that they will continue to lead to high additional costs. All of these factors have led to a change in our baseline situation, necessitating a reorganization at PW Gabon. Due to lower prices, certain tree species could no longer be processed into sawn timber, and certain sawn timber qualities were removed from the product range for the same reason. The Okoumé sawmill accordingly switched to single-shift operation, while the Azobé sawmill continued to work in two shifts and as a consequence less timber was cut in the forest. The new setup has proven itself in the difficult market situation and will be maintained in 2024, although we will be able to adjust the volume again at any time. The initial restructuring initiated in 2022 was accordingly extended due to events in the 2023 fiscal year and will not be completed until 2024. The associated operational adjustments and the focus on fewer but high-quality products were accompanied by a reduction to 658 employees (2023: 727). Unfortunately, this was necessary in order to make PW Gabon more resilient to crises and establish the basis for a successful future.
We can achieve further cost reductions by reducing camp operations. Most of our workforce will now live in the nearby city of Lastoursville. At the end of 2023, 140 employees and their families were still living in the camp, and this number will be substantially reduced further over the course of 2024.
In August 2023 after the elections, the military seized power; fortunately, the coup was peaceful. The new government has announced elections for mid-2025, which is important for the international acceptance of the country. The new government has so far attached great importance to working closely with civil society and business representatives, and it has started to advance important infrastructure projects. We are not feeling any negative impact of the change of power and are even seeing some positive signals. Nevertheless, the new situation is of course a factor of uncertainly. We are monitoring the situation closely and are in close contact with official representatives.
As in previous years, we suffered greatly from obstacles beyond our control. Road conditions did not always allow deliveries to the port. At the beginning of 2023, a landslide caused a railroad interruption of several weeks, resulting in major delivery delays. In general, the reliability and availability of rail transport remained low, and the mining companies continued to be prioritized. This led to additional costs, because we had to switch to truck transport whenever possible. Rail transport will continue to be unreliable, and we have to invest more in road transport. The new government has already started repair work on the road to Libreville. We are also in the process of planning a joint road construction team with several other forestry companies, which could ensure year-round road transport.
The inventory for the new forest management plan for the years 2025 – 2049 was completed in mid-2023. In autumn 2023, we presented the requisite studies to the authorities. These form the basis for the new management plan and renewal of the existing concession. The studies were validated, and we can continue with the development of the new management plan. We have already started to carry out the full inventory in the future harvesting regions. All other requirements have already been met, and we are therefore optimistic that the new management plan will be approved soon. We need this secured commitment in order to move forward with investments in energy production as well as sawn timber processing and value creation. The worldwide market situation also calls 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 and reduce costs.
PW Gabon’s total investments in the amount of EUR 0.8 million were used for forestry machinery, vehicles, and inventory.
Production in the forest and in the sawmills was affected by the market downturn, with a low point in the middle of the year. As a result, all activities were halted in the third quarter for a month. This saved costs and prevented inventory build-up. In addition to high costs, the storage of certain tree species also has an impact on timber quality. All forestry and sawmill companies in Gabon that we are aware of had to resort to these or even more drastic measures last year.