Cheap timbers—not certified by PEFC or FSC—are being diverted to the UK, with one of the country’s leading distributors of timber, panels, and decorative surfaces claiming that EUDR enforcement has caused a flood of hardwood products to arrive at UK ports.
That is according to James Latham, which, in its latest trading update, reported that revenue fell 2.3% from £190.9m to £186.6m for the six months to September 30, 2024. It said that cheaper, uncertified products were especially prevalent in African sapele markets, which negatively impacted the company’s profit margins for those products.
As the world’s second-largest timber importer, the UK is among the most exposed economies to illegal timber within its supply chains. It comes as the country’s top retailers and merchants have, for more than a year, pushed the current (and past) government to speed up legislation to align with the EUDR. In a letter obtained by the Financial Times, the retailers Tesco and Marks and Spencer, which also included Asda, Lidl and Wm Morrison, last year claimed that “efforts to rid supply chains of products linked to deforestation could be derailed” unless the new rules align with the new EU rules – now delayed until December 2025.
“Our British supply chains remain uniquely exposed because of the lack of a legislative process in the UK,” the retailers wrote, adding that contributors of raw materials to their supply chains were “unwilling to provide the necessary transparency” without a legal requirement.
James Latham said the cost prices of timber and panels have remained stable throughout the first half of the year, but some of its commodity products show signs of price weakness. Sales volumes are up 4.1% compared with last year’s period, but the company is seeing a move in the product mix towards cheaper alternative products.
“Whilst our panel product side of the business has continued to perform well, the anticipated improvement in our timber business did not occur,” said James Latham chairman Nick Latham. Operating profit was £11.3m, down £3.2m compared with the £14.5m operating profit last year.
Profit before tax was £13.6m compared with £16.4m for the same period last year. The tax charge of £3.4m represents an effective rate of 25.3%, reflecting the UK basic corporation tax rate.
Lathams said the second half of 2024/25 has started with similar volumes to the previous six-month period to September 30 2024, with similar margins. “We were expecting the market to show signs of improvement in the second half of this year, but so far, this has not materialised,” according to Mr Latham. “We have seen considerable challenges in our marketplace, including a significant competitor going into administration and others looking to quickly turn inventories into cash, affecting short-term margins in some product groups.”
“This has created opportunities to increase our market share and enabled us to take on three new brands of melamine and laminate panel products as well as some key specialist salespeople to help promote these new products.”
- To learn more about the push by UK retailers and merchants to align the post-Brexit 2021 Environment Act to the EU’s EUDR, click here for Wood Central’s special feature from last year.
