Woodbois Ltd (AIM:WBI) continues to observe strong global demand for sawn timber and corresponding price support for products, it said in a trading update.

The producer and processor of sustainable African hardwood and hardwood products said production of sawn timber and veneer in the third quarter was the highest it had been this year.

Total sawn timber production rose to 4,700 cubic metres in the three months to the end of September, a 36% increase on a daily average basis on production in the first half of 2021.

Total veneer production was up 24% on a daily average basis at 1,140 cubic metres from the first half of 2021.

Revenues in the quarter rose 41% to US$4.5mln from US$3.2mln in the corresponding quarter of 2020, taking year-to-date revenues to US$12.7mln, an 8% improvement on the US$11.8mln of revenues in the same period of 2020.

The group margin in the first nine months of the current year was 20% versus 8% in the same period of 2020.

The company continues to field enquiries from major corporations interested in carbon offset services. It is increasingly confident about the fast-growing market opportunity linked to corporate decarbonisation and in its progression towards establishing its first large-scale project in Gabon or elsewhere in West Africa.

The second half of last month saw members of Woodbois’s carbon team in Gabon assessing potential project sites and planting strategies. This work will feed into a comprehensive feasibility study being prepared in cooperation with an independent consultant for submission to the government of Gabon.

Woodbois said it is encouraged by new climate change legislation adopted by the Gabonese Republic last month.

Conditions in Mozambique remain uncertain, however, and the group is reviewing its strategy and plans there for 2022.

The group performed in line with expectations in the third quarter as it adapted to higher shipping costs and is still targeting turning cash flow positive at the operational level in the final quarter of the year.

Woodbois continues to expect a step-change in the pace of revenue growth when the shipping industry returns to a worldwide equilibrium, which is anticipated during 2022.

“Having delivered further gains in output in Q3, and with increased veneer capacity due to come online early in 2022, the over-riding focus remains on driving returns on the significant investment made in our operations. As operational cash flow turns positive, the logical next step is to evaluate the multiple incremental opportunities that exist within our fragmented marketplace. We are actively seeking to bolster our leadership team to help us perform such evaluations, as well as to ensure that we continue to deliver on our internal growth strategy,” said Paul Dolan, the chair and chief executive officer of Woodbois.

“The major carbon markets have continued to attract increased attention from investors and organisations looking to service internal climate goals and gain valuable exposure to carbon price movements. Increased interest has driven the main compliance markets to new all-time highs, reflecting strong fundamentals and a positive market outlook. Even more encouraging for Woodbois is the growth in the Voluntary Carbon Market. Recent analysis reported that trading volumes for the first eight months of the year were 27% higher than in 2020, with total volumes expected to breach US$1bn this year. It is also positive to see carbon credits from reforestation projects command significant price premiums over other project types.

“Interest in carbon markets has been further buoyed by COP26 coverage. We look towards COP26 with great interest for a number of reasons. Woodbois will have a presence at the conference, and we are excited by the opportunity to contribute to discussions and grow our network in the climate space. We also hope that the conference will set in place further mechanisms for change, hastening global action in line with the goals of the Paris agreement and allowing our inherent strengths to be increasingly relevant to the transformations required,” Dolan said.

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