Rougier on the rebound

Summary
Rougier’s turnover rose 11.2% in 2010.
This year its sawn timber output in West Africa will increase 40%.
It is expanding one Gabonese sawmill and building a new one.
It aims to have all 877,000ha of its Gabonese concessions FSC-certified this year.
It is building a pilot plant in Cameroon to make products including decking and finger-jointed scantlings.
UK sales are doubling year on year.

In the depths of global recession Rougier mothballed a sawmill in Gabon and all its operations in Congo (Brazzaville). But the French-based hardwood and plywood supplier told TTJ at the time that it was in fundamentally good shape. It had a respectable debt to equity ratio of 48% and was continuing to invest in plant so it was ready to capitalise on the eventual upturn. It was “taking the long-term view and using the slowdown to prepare for the future”.

Two years on it’s clear those words weren’t just a market morale booster. All Rougier’s African facilities were back on stream in 2010 and are now up to pre-slump capacity. Combined sales of its Africa and International Trade and French import-distribution divisions in the last financial year rose 11.2% to €138.7m, while EBIT hit €6.4m compared to a loss of €16m in 2009. The improvement accelerated as it went on. Final quarter turnover hit €40.1m, a rise of 20.5% on 2009.

This year Rougier expects to step up the pace again. Sawn timber output from its mills in Gabon, Cameroon and Congo is set to rise 40% to 140,000m³, while production from its Gabonese plywood factory will be 35,000m³ and log output from its 2 million ha of forest concessions across the three countries, 600,000m³.

“Everyone destocked in the financial crisis, but through 2010 and into 2011 we’ve seen customers restocking worldwide and we’ve increased capacity in line with that,” said sales director Luc Auguin. “Prices are also now at reasonable levels. They could be better, but they could be worse!”

He acknowledged that not all Rougier’s markets have recovered at the same pace, but the majority are headed in the right direction.

“Spain and Portugal, where construction remains depressed, are still slow, but France and Italy are doing quite well and eastern Europe is reasonable too,” he said.

The company’s 2010 sales to Asia fell 25% (compared to a 22% rise in Europe). This was attributed largely to the log export ban Gabon introduced last year – which reduced Rougier’s overall log sales from 26.8% to 24.8% of turnover – but Mr Auguin said the loss of business was now being recouped.

“Restrictions on log exports from Africa are something we all have to face as governments put the emphasis on developing their own processing and manufacturing industries,” he said. “We’ve reorganised around the Gabonese ban. We’re processing more into lumber and plywood and selling more to the Gabon domestic market. Although it doesn’t yet entirely compensate for the loss of log export sales – which were principally okoumé, but also included azobe, padouk, awoura and okan – we’re also increasing Asian lumber exports.”

Helping insulate Rougier against log export curbs, and further underlining its confidence in the market into 2011, is its continuing investment in Central African sawmilling, part of a current annual capital spend in the region of €11-12m.

“We’re installing a new line at our sawmilling site in Mevang in Gabon and building a new mill at Ivindo,” said Mr Auguin. “Both are expected to be completed in the summer.”

While production may have been curbed during the downturn, one aspect of Rougier’s activities that certainly weren’t were its forestry certification and legality verification programmes. And these continue to be the target of about €1m spending a year.

Environmental progress

“Among targets for 2011 is to complete our FSC certification in Gabon,” said social and environmental manager Paul-Emmanuel Huet. “Currently 668,000ha of our concessions there are already FSC certified, and the remaining 189,000ha are audited by Bureau Veritas to the FSC Controlled Wood traceability standard.”

In Cameroon, 623,000ha of Rougier’s concessions have SGS TLTV (Timber Legality and Traceability Verification) accreditation, while three forest concessions covering 286,000ha in the region around Mbang are FSC-Controlled Wood accredited by SmartWood.

“And we want this FSC Controlled Wood area to move as quickly as possible now to full FSC certification,” said Mr Auguin. “We’re given added impetus there by levels of demand for the region’s particular species; sapele, tali and ayous.”

In Congo, meanwhile, 538,000ha of Rougier’s concessions have a TLTV Verification of Legal Origin (VLO) certificate.

Rougier says its environmental drive stems essentially from its corporate culture, pointing out that it introduced its first forest management plan in Gabon a decade ago. But market demand is also, of course, shaping its strategy.

“Importers in an increasing number of countries are now insisting on some form of legality verification, at the very least,” said Mr Huet.

“In the US, due to the [anti-illegal timber] Lacey Act, we now already supply TLTV documentation automatically with every order, as it makes importers more comfortable,” added Mr Auguin. “In the UK we still only provide it when asked for, but that may change, as more than 70% of customers are now requesting it.”

According to Rougier, the EU’s new Illegal Timber Regulation (ITR), which comes into force in March 2013, will give demand for legality verification added momentum and it is closely involved with the rest of the French timber industry in continuing negotiations on the legislation’s criteria and enforcement.

“These are discussions concerning operators’ [illegal timber] due diligence risk assessment, and whether the French industry association, Le Commerce du Bois (LCB), will have ‘controlled organisation’ status [which means its own due diligence system will be accepted under the new legislation],” said Mr Huet.

Currently, demand for FSC certification with Rougier’s timber and plywood is largely coming from governments and the DIY market, but it expects this to increase too.

“The only concern is that the ITR will lead to European customers specifying proof of legality and not certification,” said Mr Huet.

To maintain market momentum for certified timber and emphasise its commitment to sustainable timber production, Rougier strongly promotes its FSC certification and, particularly, what it entails on the ground in Africa. This led to it being awarded an FSC “Global Partner Award” last year for supporting the FSC brand (ttjonline Sept 28).

“Many people are still unaware of the ongoing work certification involves, especially the social aspect, providing the local communities healthcare, schooling, sanitation and electricity and so on,” said Mr Huet. “It’s an area we feel needs to be highlighted.”

Currently he added, the company is working with LCB to produce a film about its forest management and FSC-certification programme in the Congo Basin.

Strong UK prospects

During the recession, Rougier’s UK customers specified less FSC-certified timber, but the company expects market recovery and the 2012 Olympics developments to boost demand. In fact, the company is bullish about its UK prospects overall.

“Since we appointed our north European sales manager Jeroen Hofenk, who visits the UK every six weeks, we’ve seen business there double year on year,” said Mr Auguin. “Currently our UK sales are predominantly sipo, sapele and iroko. We don’t sell much of our main species, okoumé, but maybe that will change too as we know it is now imported into the UK in the form of finished doors.”

He added that Rougier’s 80,000m³ a year kilning capacity also gives it an advantage in the KD-oriented UK market.

“And to develop the Anglo-Saxon market generally we’re also hoping to persuade customers to accept more standardised dimensions,” he said. “This could cut lead times on KD from six to four months, maybe less.”

In the years ahead, Rougier also sees prospects for increasing its sales into African markets.

“We actually see our roots as a business more in Africa than France,” said Mr Auguin.

In line with this, he added, the company will also continue with its strategy to improve and develop its African processing and manufacturing facilities.

“Our latest project is a pilot plant in Mbang, Cameroon to make further processed products on a medium scale for export,” said Mr Auguin. “It will use sapele, tali, okan and ayous and the range will include finger jointed scantlings, decking kits, tool handles and curtain rods.”