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Sustainable timber company Woodbois based in Gabon has recently turned around its business to become profitable for the first time and has added carbon offsetting to its traditional business. Chief Executive Paul Dolan and Head of Carbon Market Solutions Michael Floyd talk to The Armchair Trader about the company and the new direction it is taking.

Woodbois has around  170,000 hectares of oukume forest under management in Gabon, a country the size of the UK with forest coverage of 87%, and another 300,000 hectares in Mozambique. For the moment Woodbois’ main point of focus is Gabon where it runs a sawmill and a veneer factory at Mouila, 430km from the port of capital Libreville from which the timber is exported.

Q: The company prides itself on producing sustainable African hardwood. How do you ensure that your production is sustainable:

Paul Dolan: One hectare is roughly the size of a football pitch. There could be between 500 to 1,000 trees growing in one hectare of forest and we are allowed to take only 5 or six trees from one hectare. Once we do that we can’t go back into the same block for 20 years. That is how the business is sustainable. Our obligation at the end of the 20 years is to either hand back or renew the licence with the forest in the same shape as we have received it.

The forests in Gabon have a large rain canopy. When you remove one tree, which can be up to 10 metres high, it is not necessary to plant a new tree in its spot because there is enough light and space for up to seven new plants to grow taller.

Q: Can you talk us through how your business works?

Paul Dolan: We take the logs from the forest and run them through our mills in which we have invested over $6 million over the last four years, or through our veneer factory, in which we have invested a similar amount and we continue to invest in.  We make sawn timber for the construction industry and veneers which go towards making plywood, particularly the fairly expensive marine-grade plywood.

Michael Floyd:  A single tree can produce up to 10 cubic metres of timber at a price of between $1,800-$2,000 per cubic metre. Of course, you need a large acreage to produce the wood but it is more important how you handle the logistics so that you create the least environmental and any other impact. Where the factory is located is as important as the size of the forest we are managing.sustain

Q: The company went from being unprofitable to making a profit for the first time in 2021. Can you talk us through how you achieved that?

Paul Dolan: I came into the company that had almost no revenue more than five years ago and it has grown into what it is today (turnover of $17.5m in 2021 and the first-ever positive EBITDA of $1m, up from a loss of $1.7m in 2020). From here on, we expect to make something close to $27 million this year and more than that next year. What has made a difference is the investment in our core business, in machinery. We only had a certain amount of firepower (money raised) and we chose to make that money work in Gabon first. Our business is high margin, particularly veneer.  In 2019 we made something like $4-$5 million in terms of production and we think we can take that to $30-$40 million.

Q: Apart from producing your own timber you also run a separate trading operation, trading timber from other African producers.

Paul Dolan: There is a $4 billion export market for African hardwood timber products every year. The share of our revenue from that was around $9-$10 million last year, and we are just scratching the surface there. We buy from other suppliers and we sell through our service channels, selling directly to importers rather than end-users in order to keep our cash cycle as short as possible. Funding African businesses is difficult and if we are there with cash then we are in a strong position.

Michael Floyd: In the sustainable timber space there are very few actors that try and do it as sustainably, as above board and as profitably as Woodbois try to achieve. Having that credibility makes a difference. People want to see good actors, they want to buy the wood but also want to make sure that it was sourced sustainably and legally.

Q: You introduced a new strand to your business recently, carbon offsetting. What was the business reasoning behind that?

Michael Floyd: When I joined Woodbois about a year and a half ago (as the head of Carbon Market Solutions) we looked at the carbon market in great depth and there was an absence of high-quality producers of carbon credits, people not just planting trees but growing trees. In Gabon, we have a very special opportunity to grow and nurture trees (for carbon sequestration). As you know we need to take the carbon footprint of the planet from 50 billion to zero and planting trees is only a tiny step toward that. We decided to become a developer of projects in West Africa because we believe it will complement our business. Being clean and being sustainable will reduce the cost of our capital and add to our value chain because it attracts a different investor, an investor with deeper pockets that requires lower returns. We are talking to senior players in this space and we think we can take this model to many other countries in West Africa once we demonstrate the success in Gabon. Sustainability also means creating jobs and creating profit for local communities.

Q: You plan on creating carbon offsets by planting trees and sequestering carbon. How do you measure how much carbon you have actually sequestered?

Michael Floyd: There is a model you can use to calculate this that is based on the size of the tree. There are carbon offsetting standards registries like Verra that come and inspect the carbon stock on the land when you start planting and then they check again on a frequent basis so you can have a very good idea of how much carbon has been sequestered. The standards agency has a rule of five years after planting before you can claim credits but in effect, the trees start sequestering carbon from the day they are planted.

Paul Dolan:  Five or four years ago the economics of carbon credits didn’t work, the price of voluntary carbon credits just wasn’t enough to do projects like ours. But then former Bank of England governor Mark Carney stepped in in 2020, launching an initiative to expand the trading of carbon instruments which could see this market grow to $100 billion by the end of this decade. Now the voluntary carbon credits are priced very differently from the regulated carbon markets and we saw prices go above $100/t earlier this year. The way the market has changed under Mark Carney gives us confidence in this market. We can’t imagine a better annuity stream over the next 40 years. This is only our first project and it is very unlikely to be our only project.


Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Vanya Dragomanovic

Vanya Dragomanovich

Vanya is an award-winning financial journalist who has worked in both television and newswires. She spent over 10 years at Dow Jones covering commodity markets, including metals, coffee, cocoa and oil. She also reported from the floor of the London Metals Exchange, and appeared on CNBC to discuss international metals markets. Since then she has written for several leading financial publications, including serving as commodities editor for FTSE Global Markets.

Vanya continues to cover international commodities markets globally, specialising in particular on metals and alternative energy. She is also the author of a book on CFD trading.

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