Border Timbers delivers solid revenue growth in Q1 2023

BUSINESS REPORTER

Border Timbers Limited reported a 125% revenue increase in the nine months to March 31, 2023 to ZWL$7.6bn from ZWL$3.4bn achieved in the prior comparative period, attributed to high-quality timber sold at high prices in the period under review.

In a trading update, Border Timbers board chairman, Elias Hwenga, said the company achieved its replanting target with excellent survival rates and other silvicultural activities like weeding and pruning were broadly in line with planned targets following a good rainy season.

“The inflation-adjusted revenue for the nine months ending March 2023 was 125% higher compared to the same period prior year. This was mainly because of the consistent quality of our Kiln dried timber, which resulted in better average selling prices. A high profit before tax was driven mainly by fair value gain due to biological assets transformation,” Hwenga said.

He said the primary silvicultural focus of the company is to grow and maintain the forests to further strengthen the biological assets.

Hwenga said the company has started preparing for the fire season, as inferno remains a major business risk for the forestry business.

Border Timbers was below target on harvesting and sawmilling activities due to frequent breakdowns of aged sawmilling equipment.

But Hwenga said recapitalisation of the sawmills was on course with the installation of new sawmills at Charter and Sheba expected in June 2023 and December 2023 respectively.

“We are excited that our Sheba, Imbeza, Sawerombi, and Charter Estates are now FSC (Forest Steward Council) certified.

“This is expected to bring enhanced adherence to forestry operational practices, a premium on product prices as well as opening new markets, particularly the European market where FSC certification is a prerequisite,” Hwenga said.

He said lumber sales volume was 12% down compared to the comparative period in the prior year and the reduction was mainly because of lower production from the sawmills, which is expected to improve after the commissioning of the new sawmilling equipment.

The demand for lumber remained strong in the local market and the company continues to aggressively expand both the local and export market.

Pole sales volume was 29% lower than the comparative period in the prior year, this is mainly because of timing differences that are usually experienced in the acquisition of tenders, which is asymmetrical.

The company expects an improved performance in the poles business due to expected demand for the product in Botswana, Zambia, and Malawi markets.

Hwenga said government was yet to pay anything towards the settlement of the ICSID (International Centre for the Settlement of Investment Disputes) arbitration proceedings, which was concluded in November 2018 after the ICSID ad hoc Committee dismissed the government’s annulment application in its entirety and confirmed the final award.

“The company has opened settlement negotiations with the government of Zimbabwe as represented by the Ministry of Foreign Affairs and International Trade.

“The company, under the Settlement Agreement with the former shareholder, has commenced its separate negotiations with the government. For the duration of the ICSID Arbitration, the company has continued to occupy and operate its forestry business on parts of its property (the unaffected parts) and indeed, the occupation of the unaffected parts continues undisturbed.

“Subject to full payment of the award, the company has the right to continue operating its business on, and occupying, the unaffected parts as set out above,” Hwenga said.

He said the company continued to occupy the unaffected land and operate its business in the ordinary course until there has been an agreement with the government on the settlement of the arbitrary award.

Hwenga said recapitalisation remained a key priority with the company’s replanting program already on course to reduce the unplanted area to the industry standard of 5% in the next three years.

He also said management remained focused on cost containment, closely managing operating expenditure and working capital positions most effectively and efficiently.