Obtala sees ‘supercycle’ ahead for agriculture and timber

The Africa-focused firm says it continues to be shown ‘potentially accretive acquisition opportunities’ in the region after its purchase of WoodBois in July.

London-listed Obtala reported a $22.7 million profit boost in the first half of 2017, putting it back in the black after a $3.8 million loss a year earlier.

The investment firm said profit was largely driven by its $12.2 million acquisition of WoodBois, a Copenhagen-based global trader and producer of sawn timber, completed in July.

Obtala is in the process of putting in place separate boards for its agriculture and timber divisions within Argento and Montara, two subsidiaries.

“During the past 12 months, it has become evident that a separation of the two boards will strengthen our universe of potential investors and partners, as new funds and/or trade finance facilities can be directed towards specific business lines with their own P&L, board and management teams,” it explained.

The company also said it is in discussions with several parties to provide tranches of $25 million in trade finance, expected to be drawn in the fourth quarter, to support its growing timber trading division.

“With limited capital, WoodBois’ annual revenues of about $15 million represent less than 0.5 percent of the reported African export market alone,” Obtala noted. “[The trade finance facility] would provide the trading division with the necessary capital to achieve 3-4x growth in the next 18 months.”

Miles Pelham, the firm’s chairman, said the industry was on the cusp of a “supercycle” in timber and agriculture pricing.

“I am ever more aware of the impact with which population growth, and in particular growth in the global middle class, is creating demand for food and housing that is simply not being matched on the supply side. This is seen not only in Asia, but with our customers in Africa, the Middle East and South America,” he concluded.

In 2016, Obtala shed its retail outlets and mining interests to focus on two core areas: sustainable forestry in Mozambique, operating 312,465 hectares; and sustainable agriculture in Tanzania, operating 1,730 hectares.