EANS-Adhoc: Precious Woods Holding Ltd.
Forceful set of measures in response to a disappointing first half-year
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ad-hoc disclosure transmitted by euro adhoc with the aim of a Europe-wide
distribution. The issuer is solely responsible for the content of this
announcement.
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6-month report/Sustainable Forestmanagement
19.09.2012
-Group: major cost cuts fail to prevent a disappointing first-half result.
-Gabon: sales down due to logistical difficulties and production downtime caused
by technical problems
-Brazil: half-year result positively impacted by the divestment of BK Energia
shares
-Europe: depressed economic environment puts pressure on sales and margins
-Outlook: six-point plan to strengthen operations and secure liquidity
Zug/Zurich, 19 September 2012 - 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.
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 USD 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 USD 0.3 million improvement in Precious Woods'
year-on-year operating result. For all that, a USD 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: Logistical problems and late completion of the sawmill in 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 USD 11.1 million and were 43% lower
than in 2011. The effect of the drop in volumes fully affected EBITDA, which at
USD -0.4 million was very disappointing and USD 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: Half-year result in Brazil impacted by the divestment of BK Energia
shares
At USD 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 USD 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
USD 1.5 million to USD -3.3 million, despite a USD 1.5 million improvement in
the operating result.
EUROPE: Weak economy
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
USD 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.
OUTLOOK: Six-point plan to strengthen operations and secure liquidity
Precious Woods expects the economic environment to remain difficult during the
second half of the year but will be implementing a six-point plan to bring about
a rapid boost to operations and secure the Group's long-term liquidity:
- Delisting on the SIX: In order to reduce costs and expenses, the Board of
Directors has decided to apply for delisting of PW stock on the SIX Swiss
Exchange. In the future the stock will be marketed via the ZKB's OTC stock
exchange platform for non-listed shares. Communications with our shareholders
will remain as transparent as ever.
- Rigorous cost-cutting: Cost-cutting will be implemented rapidly and
effectively across the board in all departments and segments. The organization
will be significantly simplified. The drastic reorganization at PW Europe will
soon be completed and sales and marketing will be incorporated within Group
management.
- Securing liquidity: We are seeking cooperation with a strong partner in Brazil
to secure liquidity. At the same time, we are looking into the possibility of
raising new capital from interested investors or a capital increase at Group
level. Alternatively, Precious Woods is considering the sale of its remaining
minority interest in Precious Woods Central America.
- Strengthening management in Gabon: Gabon and Central Africa are set to become
strategically more important and we are therefore taking steps to strengthen
management. More specifically, we are hoping to find increased expertise in
processing and logistics.
- Simplified Group structure: Increased significance of Gabon together with the
planned simplification of Group structure will cut the number of Group
management. After consultations with the Board of Directors, CEO Joachim
Kaufmann will be resigning from his post with effect from today, but will remain
available for the foreseeable future to coach local management in Brazil. The
Board of Directors wishes to thank Mr Kaufmann for his commitment to the
turnaround process, for clearing up many of the complex issues from the past,
and the enormous improvements he has made to productivity, particularly in
Brazil. Group Management will henceforth comprise Gerhard Willi (Chief Financial
Officer), and Stefan Meinhardt, (Chief Commercial Officer).
- Reduced Board of Directors: The Board of Directors will be reduced from six to
three members as it has been requested by many shareholders at the last General
Assembly meeting. Three directors are resigning from the Board: as announced
earlier, Ruedi Wehrli (Vice-Chairman) is leaving following his election as
President of Economiesuisse with effect from 1.10.12. Additionally Marga Gyger
and Markus Breitenmoser are also leaving the Board of Directors. The Board
thanks all three members for their committed contribution in the Council. From
now on, the Board of Directors will thus consist of three members: Ernst A.
Brugger (President of the Board), Katharina Lehmann and Dominik Mohr. Board of
Directors and Group Management will selectively consult external experts as
needed.
The Board of Directors and Group Management firmly believe that these six
central measures will show rapid and significant results. Since we place a great
value on transparency to all shareholders we will conduct an information session
for shareholders and investors or in the event of a capital increase hold an
extraordinary general assembly meeting in November 2012. Our objective is to
make the company as successful in business terms as it undoubtedly already is
and will remain from an ecological and social point of view.
To download Half-Year Report 2012
www.preciouswoods.com
Conference call:
19 September 2012, 9.15 a.m. detailed information can be found at
www.preciouswoods.com
end of ad-hoc-announcement
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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. The generation of emission rights and
electricity from wood waste represent further integral elements of the company's
business. Shares of Precious Woods Holding Ltd have been listed on the SIX Swiss
Exchange since March 2002. Additional information about Precious Woods can be
found at www.preciouswoods.com
Further inquiry note:
Further information:
Precious Woods Holding AG, Jacqueline Martinoli, Head of Finance /
Communications, Tel. +41 44 245 80 15, Fax +41 44 245 81 12,
media@preciouswoods.com
end of announcement euro adhoc
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issuer: Precious Woods Holding Ltd.
Baarerstrasse 79
CH-6301 Zug
phone: +41 44 245 80 10
FAX: +41 44 245 80 12
mail: office@preciouswoods.com
WWW: http://www.preciouswoods.com
sector: Forestry & Timber
ISIN: CH0013283368
indexes: SPI
stockmarkets: Main Standard: SIX Swiss Exchange
language: English