The Precious Woods Group reported weak results for the 1H 2012

Sep 24, 2012. /Lesprom Network/. The Precious Woods Group has not achieved the goals that it had set itself for the first half of 2012 and sales during the period under review were down 34% on last year. This was largely attributable to external logistical and internal technical problems that occurred at its Gabon production site as well as declining sales by Precious Woods Europe, as the Group said in the press release received by Lesprom Network. Nevertheless, the tail-off in demand in the Benelux region – an important market for South American woods – had no effect on Precious Woods Amazon’s result during the first half of the year. A $3.2 million reduction in costs, at holding company level, and the positive effects of the reduction of its stake in BK Energia resulted in a $0.3 million improvement in Precious Woods' year-on-year operating result. For all that, a $1.8 million loss was still unsatisfactory. The Board of Directors has therefore decided on a wide-sweeping plan with six distinct measures and initiated their implementation forthwith. Gabon: During the first six months of the year, the forestry and timber industry in Gabon suffered an accumulation of logistical problems. The Kango Bridge, which is vital for traffic, was damaged by a barge, and there were strikes in the port town of Owendo as well as safety-related problems with waggons of the railway company. Together, these had a huge negative influence on PW Gabon’s half-year results. In view of logistical problems, completion of the new saw line in Bambidie will be delayed by several months. In addition, there was a massive downturn in local roundwood sales caused by declining customer demand and unexpectedly inferior roundwood quality. Together, these factors led to a substantial drop in sales, which stood at $11.1 million and were 43% lower than in 2011. The effect of the drop in volumes fully affected EBITDA, which at $ -0.4 million was very disappointing and $4.8 million below the figure for the previous year. Despite these difficulties, Precious Woods Gabon diversified its customer portfolio, expanded its product range and began to open up important new markets. Brazil: At $6 million, the sales volume reported by Precious Woods Amazon (PWA) in mid-2012 was approximately 4% below the 2011 result. The reason for this was a lower yield of the logs in the log yard. This problem will be solved in the future following a reorganization of the log yard. PWA made further progress on the operational front. Process management was further improved, a redundancy compensation scheme cut the workforce by another 55 employees and the CEO was replaced by a new management team of existing senior management. The conversion and upgrade of four sawing lines will boost productivity. In autumn 2011, Precious Woods reached an agreement on debts outstanding from 2005 with regard to the purchase of the BK Energia biomass power plant. The cash-neutral solution left Precious Woods a minority shareholder in BK Energia, holding just 40% of the shares. As a result, BK Energia was no longer fully consolidated since 1 April 2012 and, as from that point in time, has been included in share of profits of associates. The described divestment of shares had a one-off positive impact of $3.2 million on the EBITDA of Carbon&Energy and a one-off negative impact of -1.2 million on PWA's operating result. As a result of additional higher provisions for litigation, PWA's EBITDA was down by $1.5 million to $ -3.3 million, despite a $1.5 million improvement in the operating result. Europe: In its main market, the Netherlands, Precious Woods Europe (PWEU) is suffering massively from the ongoing economic crisis, which is currently beset with liquidity problems and government-imposed austerity measures. Market prices have come under enormous pressure. In order to compensate partially for weak demand, sales activities in England, Germany, Denmark and Belgium were intensified. At $8.8 million, sales for the first half were around 28% lower than last year. Due to lower sales, the operating result was disappointing in spite of the restructuring measures. Precious Woods is an international company active in the sustainable management and use of tropical forests. The company’s core activities include reforestation and sustainable management of tropical forests, timber processing and the trading of FSC-certified timber products.