Customer Base and Revenue - The company had a total of 119, 143, and 158 customers for the years ended December 31, 2024, 2023, and 2022, respectively, with the five largest customers accounting for approximately 50.9%, 53.2%, and 55.3% of total turnover[33]. - For the years ended December 31, 2024 and 2023, 7.7% and 0.4% of total revenue were generated from customers located in North America, impacted by U.S. tariffs on wood product imports[43]. - The company reported total revenue of 25,457,000 in 2023[163]. - Logs accounted for 62.8% of total revenue in 2024, up from 40.9% in 2023, while flooring sales dropped to 9.1% from 23.8%[163]. - Sales to China represented 49.6% of total revenue in 2024, down from 60.9% in 2023, indicating a shift in market dynamics[164]. Operational Challenges - The company faces increased operating costs due to rising labor costs and logging permit expenses, which may adversely affect profitability[34]. - The company is dependent on a large workforce for manual labor, with risks of labor shortages affecting production[30]. - The company’s ability to obtain sufficient logging permits is crucial for future revenues, with no assurance of continued approvals[36]. - Environmental regulations have become more stringent, potentially increasing compliance costs and impacting harvesting volumes[29]. - Global market fluctuations and economic downturns could materially affect the company’s financial condition and operational results[40]. Market Competition and Economic Conditions - Competition from local and overseas firms, as well as from solid wood substitutes, poses risks to market share and revenue[46][48]. - Economic conditions in Hong Kong and China are sensitive to global economic conditions, and a downturn could negatively impact business operations and financial condition[90]. - The company’s pricing policy is based on production costs, transportation costs, and market prices, which may fluctuate due to raw material costs[165]. - The company anticipates ongoing restrictions on the export trade of forest products due to trade obstacles such as formaldehyde regulations, tariffs, and anti-dumping measures[168]. Regulatory and Compliance Issues - The PRC government may impose significant oversight and discretion over the company's operations, potentially affecting the value of its American Depositary Shares (ADSs)[59]. - The company is subject to a withholding tax rate of up to 10% on dividends payable by Chinese companies to non-PRC-resident enterprises[65]. - Current PRC regulations require the company's PRC subsidiary to draw 10% of its after-tax profits each year to fund a common reserve, which may limit dividend distributions[64]. - The company is required to comply with new cybersecurity review measures if it possesses personal data of over one million users and intends to list in a foreign country[61]. - The lack of PCAOB inspections of audit work in mainland China may limit the company's access to U.S. capital markets[71]. Corporate Structure and Shareholder Information - Approximately 68.56% of the company's issued share capital is owned by Easy Bliss Limited, indicating a controlled company status[107]. - The corporate structure includes multiple subsidiaries, with significant ownership stakes held by Peru Forestry Investments Co. and Golden Vast Development Limited[146]. - The company is classified as an emerging growth company, allowing it to take advantage of reduced reporting requirements under the JOBS Act[135]. - The company may face limitations on dividend payments under BVI law, which requires assets to exceed liabilities[132]. Sustainability and Environmental Management - The company has achieved FSC certification for five subsidiaries, enhancing its reputation for sustainable forestry practices[154]. - The company obtained necessary certificates for sustainable forest management, demonstrating compliance with relevant laws and regulations during the years ended December 31, 2022, 2023, and 2024[175]. - The company has a commitment to environmental management, with responsibilities for managing emissions and waste from its operations[186]. - The company has complied with environmental regulations, ensuring no incidents of non-compliance during the reporting years[175]. Product Development and Market Expansion - The company introduced essential oils as a new product in November 2020, refined from timber in its forests, and commenced production and export[142]. - The company is pursuing light-asset FSC business operations to expand forest resources without significant capital expenditure[160]. - The company plans to enhance R&D efforts to develop innovative and value-added products to navigate export trade challenges[168]. - Market expansion efforts are underway in Europe, targeting a 20% increase in market share by the end of 2023[172]. Financial Performance and Projections - The company reported a revenue of 1.9 billion and 300 million in revenue by the end of Q3 2023[172]. - The company reported a net profit margin of 12% for Q2 2023, up from 10% in the previous year[172]. Legal and Compliance Costs - The company expects to incur significant legal, accounting, and compliance costs as a public entity, particularly after ceasing to qualify as an "emerging growth company"[97]. - If the company loses its foreign private issuer status, it would incur significant additional legal and compliance costs[133]. - The company may face challenges in enforcing judgments against its directors and management due to its incorporation in the BVI[115]. Intellectual Property and Branding - The company has registered the domain name www.nature-wood.com, indicating potential online presence and branding efforts[175]. - The registered trademarks cover various classes, including categories related to building products, showcasing the company's commitment to brand protection and market differentiation[171].
Nature Wood(NWGL) - 2024 Q4 - Annual Report