LONDON (Alliance News) - Agricultural and timber company Obtala Resources Ltd said Monday both its timber and agricultural businesses have moved into operational phases ahead of harvesting in April, but said it has downsized its African home stores division on the "depressed local business environment".
Obtala said it has made strong progress in both its agricultural and timber business since the year-end on December 31, with sales and production "well underway with very encouraging early results".
Within its agricultural division, Obtala said it has received trial or proof-of-concept orders for its products from buyers in the Middle East and Europe during the first four months of 2016, and said it began cultivating three varieties of sweet melon on its east African farm during the period. Obtala said, following this "successful planting programme", it has an initial 500 tonne crop ready for phased harvesting and sales in April onwards.
Obtala said its trading partner is currently attracting interest for the melons, as well as a crop of butternut squash, but said this focus meant it was scaling back on the range and volume of vegetables grown and sold into the local market.
Obtala said it is in final discussions with local authorities to activate the Export Processing Zone on site, to facilitate customs and clearance.
Obtala noted work has commended on the additional land it holds, which is not suitable for its intended agribusiness, with a soil study and site survey in progress. Obtala has previously announced its intention to cultivate a banana plantation on the site, and said experts are expected on site in April and May to provide guidance for the plantation.
Within its timber division, Obtala said progress has been accelerated after it received USD3.0 million of investment from three newly formed holding companies, as announced in February.
In that announcement, Obtala had said three independent investors agreed to inject a combined USD3.0 million into its forestry division in return for minority equity interests in the company's forest concessions in Mozambique. The investors also will receive certain off-take rights under the deal.
Obtala said, since then, it has received an order to manufacture an additional 1,000 wooden railway sleepers, and has signed a sales and marketing agreement for Asia and the Middle East has been concluded with Basic Material Ltd. This deal has led to initial orders for two containers of various timber species in China and for two containers in Vietnam, it said.
There is also interest for ten trial containers from Thailand from another buyer, Obtala added, with two further timber distributors based in South Africa both agreeing to take a trial container of mixed species.
No financial details of any of the orders were disclosed.
However, Obtala said operations have been reduced in its home stores division, with cost-cutting initiatives implemented and four outlying branches closed. Obtala added it has reduced existing product lines and is sourcing goods for improved margins.
Staff levels in the division have been reduced by 60%, it said, as "trading conditions have been difficult in a generally depressed local business environment, impacted by a depreciated currency which is pegged to South African rand and retrenchment from the local and regional, diamond and precious metal mining industry".
Obtala noted it has reduced the creditors list by 66%, with a view to consolidate and rebuild the home stores business.
"The period has been very much focused on business development ahead of harvesting in April on both the timber and the agribusiness as both businesses move from project phase to operational with new investors coming in and sales and distribution well underway with very encouraging early results," Obtala Managing Director Simon Rollason said.
"The sales pipeline is growing and the forthcoming months present themselves as an exciting period for the progress and expansion of our agriculture and timber divisions," Rollason added.
Shares in Obtala were up 0.9% at 6.30 pence on Monday.
By Hannah Boland; hannahboland@alliancenews.com; @Hannaheboland
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