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YRK
YRK
YRK - York - York Timber fire update
The York Timber Organisation Limited
(Registration number 1916/004890/06)
Share code: YRK
ISIN: ZAE000008108
("York" or "the Company")
YORK TIMBER FIRE UPDATE
The York Timber Organisation (York) that last week suffered fire damage to one
of its plantations and mills in the Lowveld has now assessed the damage and
announced the estimated losses.
Making the announcement, York CEO Lance Cooper said that the estimated losses
totalled R103 million before tax. "An amount of R78 million is the estimated
write-off as a result of timber that cannot be salvaged, while a further R25
million will be spent on the timber salvage operation. The cash cost is thus
R25 million, with the R78 million being a non-cashflow item," he explained.
The R78 million write-off would have been much higher were salvage operations
not to be conducted. Trees aged between one and seven years are written off,
while 75% of trees eight years and older are salvageable. "York has
immediately ceased harvesting unburnt timber in any of its plantations and
will process only burnt timber in its eight sawmills and plywood plant," said
Cooper.
"After salvage, burnt trees can be processed," said Cooper, "but must be
felled within a few months to avoid blue stain and rot from setting in." The
trees that cannot be processed quickly enough are placed on large wet decks
under irrigation to preserve the timber. "We have successfully stored and
preserved timber for up to three years with no losses or deterioration in
quality," he explained.
Cash injection from rights offer
The company is in the process of completing a rights offer and issue of shares
for cash that will raise R203 million by 24 August. "This will ensure that we
have ample cash resources to operate the business, notwithstanding the R25
million cash cost of the fire," said Cooper.
Log price increase to compensate
In a move unrelated to the fires, Komatiland, the largest sawlog supplier in
northern South Africa, is in the process of negotiating a 20% log price
increase with its customers. Said Cooper, "Assuming the log price increase is
successful, it will mean that in line with IFRS requirements, York must
revalue its own plantations. The fair value adjustment will result in an
increase of R226 million. Such an adjustment will more than compensate for the
R103 million decrease in earnings and value as a result of the fire."
The information in this announcement has not been audited or reviewed.
Way forward
All fires in York`s plantations have been brought under control and fire teams
are mopping up and clearing around the burnt areas to ensure that any flare
ups are contained. "All leave has been cancelled and our teams are ready for
rapid deployment should the need arise," said Cooper. He warns that burnt
areas will smolder for several days to come and will be closely monitored by
the company`s fire teams.
Limited production will be restored to York`s Driekop sawmill damaged in the
fire. While it will take six to 12 months to repair the fire damage at the
mill, contingency plans are already underway at the group`s seven other mills
to increase production to compensate for the slowdown.
In conclusion Cooper warned that the long term effects of the fire will
compound South Africa`s long term timber shortage and ultimately result in
much greater timber imports to meet the nation`s growing demand for timber and
timber products.
Issued for: York Timber Organisation Limited: 0137649200
Contact: Lance Cooper, Chief Executive Officer: 0832274700
Fax: 0137643245
E-mail: lance@yorkcor.co.za
Website: www.yorkcor.co.za
Issued by: Tish Stewart, York Corporate and Investor Communications
Contact: 0114425536/0824436399
Fax No: 0114479317
E-mail: tishstewart@mweb.co.za
2 August 2007
Sponsor
Metier
Date: 02/08/2007 10:40:06 Produced by the JSE SENS Department.
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