Forestry and sawmilling concern Border Timbers’ production volumes for the five months to November 2017 (FY2018) were 16% higher than during the same period last year driven by improved and stabilised log supply. However, delays in foreign payments continue to haunt the company.
By Melody Chikono
These have in turn affected the supply of raw materials and critical spares.
Border Timbers finance director Lysius Karimanzira told an annual general meeting on Wednesday that demand for the company’s two main products, which are poles and lumber, remains very strong both locally and regionally and the company is earning better prices comparable to previous years.
Karimanzira said the company will next month outsource its pole plant to bring about cost reduction as well as managing variable costs while the plant will also be refurbished in March this year.
This is part of the strategy to improve the efficiencies and enhance control systems. To date, all the forestry operations are now outsourced, ensuring target attainment while costs remain variable.
Under forestry, the contractor rates have been well controlled and there has been a reduction of 15% in the rates from the time of commencing the programme.
Karimanzira said the lumber market remains firm with the bulk of sales being in the local market followed by Botswana.
Sales into Mozambique are gradually picking up as mining in the northern part of the country is being developed.
Overall, sales volumes were 19% higher than the same period last year as a result of extensive marketing efforts while the order book remains full to the end of the financial year.
“Earnings before tax is positive compared to loss for the same period last year. This is as a result of a rigorous approach to managing costs along the production chain as well as challenging current practices and continually focussing more on improving efficiencies and plant capacity utilisation,” he said.
Turnover was 35% higher than the same period last year. This is due to mainly higher sales volumes and focussing more on markets and products with better selling processes.
Concerning saw mills, Karimanzira said inconsistent electricity supplies that result in higher reproduction costs using installed generators and ageing of critical equipment remain areas of concern.
However, the saw mills have been performing to the set targets.
“Continuous upgrades to critical sections in the mill are being done. The least will be completed by the end of February whereby all kilns will be refurbished and automated.
“We have initiated a turn-key project for the Sheba mill in preparation for upgrading,” he said.
The company has been focussing on cost containment measures which saw it narrowing its loss making position to US$2,59 million in the half year to June 30 2017.
While the biggest cost containment measure was on selling and distribution expenses, the company saved 5,25% on administration expenses to US$3,43 million from a 2016 comparative of US$3,62 million.
Border Timbers is hoping to have at least US$5 million in tax penalties written off to allow it to enter into a scheme of arrangement.