| Wed 26 Sep 2007, 13:24 | | YRK - The York Timber Organisation Limited - Press |
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YRK
YRK
YRK - The York Timber Organisation Limited - Press Release
The York Timber Organisation Limited
(Registration number 1916/004890/06)
Share code: YRK
ISIN: ZAE000008108
("York" or "the Company")
YORK INTERIMS SHOW GROWTH LEAP
HIGHLIGHTS
* Revenue up 52% to R247 million
* Fully diluted headline earnings per share up
36% to 118.8c (2006: 87,1c)
* Operating profit up 24% to R19,7 million (2006:
R15,9 million)
* Goedegeloof Plantation acquisition finalised in
March 2007
* Global Forest Products acquisition completed in
July 2007, making York the largest integrated
sawmilling and forestry company in South Africa
Forestry products group York has reported robust growth in its
interim results for the six months to July 2007. Revenue rose
52% R247 million (2006: R162,1 million), and profit from
operations grew 24% to R19,7 million (2006: R15,9 million).
Earnings per share were 148,8c, up 71% over 2006. After
accounting for the fully convertible preference shares issued
in two BEE transactions in February 2007, fully diluted
headline earnings per share improved by 36% to 118.8c (2006:
87,1c).
Sales volumes grew 6% over the previous period, while the net
operating margin was 8%, (2006: 9,8%), the reduction in margin
being due to a 91% increase in lower margin timber warehousing
revenue, while higher margin sawmilling revenue increased by
only 29%. The contribution per cubic metre of lumber sold
increased marginally over the previous period, indicating
stable production efficiencies.
York`s balance sheet remains solid. Stock levels increased by
34% over the 2006 period due to higher raw material prices and
organic growth. Receivables and other debtors increased by
62%, mainly due to the growth in sales prices over the period
and a marginal weakening in debtors` days. Working capital
management will be a focus going forward.
Gearing increased to 51% from 49% in June 2006, due to debt
funding of R20 million to acquire the Goedgeloof Plantation,
for which a major portion of the group`s surplus cash was also
used, resulting in lower cash and cash equivalents at the end
of the period.
Commenting on the results, York CEO Lance Cooper says, "The
six-month period under review shows robust results, despite
higher raw material (saw log) prices and a softer market for
timber finished products (lumber)."
Saw log prices accounted for some 55% of total production
costs and continued to rise during the period due mainly to
Komatiland Forests (KLF) closing the gap between long term
contract saw log prices and spot market prices by raising long
term prices. "Despite this, we were able to substantially
maintain margins through increases in lumber prices, milling
efficiencies and steady volumes," says Cooper. "York`s
ongoing exposure to these price increases has also been
partially mitigated by the acquisition of plantations and the
consequent increase in the proportion of raw materials we
produce."
During the period under review, York has made significant
progress in its strategy to develop highly efficient sawmills
underpinned by sustainable resource supplies. "The
acquisition of Goedgeloof Plantation and post-balance sheet
acquisition of GFP constitute a major step forward for the
company," says Cooper.
The enlarged York is the largest integrated forestry and
sawmilling company in South Africa, holding more than 70% of
its own raw material requirements. However, the ongoing
scarcity of timber, coupled with the effects of recent fires,
means that York may consider additional plantation
acquisitions to further reduce its reliance on external saw
log supplies.
Commenting on the devastating plantation fires, Cooper says
that the long-term effects will compound South Africa`s saw
log shortage. Approximately 16% of York`s plantations were
affected, with partial damage sustained to its Driekop
Sawmill. The mill is insured against asset losses and loss of
profits. However, only minimal self-insurance is held on the
plantations due to the difficulty and cost of acquiring cover.
A preliminary estimate of the cost of the damage is R103
million, comprising a R25 million timber salvage cashflow cost
and a R78 million reduction in asset value (non-cashflow) as a
result of timber that could not be salvaged.
An unrelated but compensatory factor is a saw log price
increase of 14% from KLF from September 2007. Cooper says,
"In line with IFRS requirements, the fair value adjustment of
York`s plantations more than compensates for the R103 million
loss as a result of the fire."
During the period, together with two of its major
shareholders, Industrial Development Corporation (IDC) and
Blackstar plc, York completed two black economic empowerment
transactions. Excluding the IDC stake, some 28% of the
company`s equity is now owned by previously disadvantaged
individuals.
Post-balance sheet, the company completed the R1,695 billion
GFP acquisition, financed by an appropriate level of gearing,
with the long term debt package backed by a high quality
forestry asset base. For the GFP acquisition, it also
completed a R350 million rights offer, as well as an issue of
shares for cash of R203 million to finance the merged group`s
working capital requirements, As a consequence, York`s
ordinary shares in issue increased from 8 170 068 to 78 370
068, with liquidity improving dramatically.
Looking ahead, Cooper says with the acquisition of Goedgeloof
Plantation completed, York is well positioned to integrate its
operations with those of GFP to further improve efficiencies
and enhance the company`s earnings. Integration of GFP into
York is well advanced and more details on the progress will be
provided with the year-end results.
While there has been a leveling off in the demand for lumber,
industry analyst Crickmay & Associates has forecast annual
lumber shortages of between 32% and 55% until 2036. As
regards prices, Crickmay estimates a current gap of R300/m3
between import parity and current prices. Future increases
will thus level off as import parity is approached.
Looking to the next six months, Cooper says that York
traditionally generates the larger portion of its profits
during the busier second half of the calendar year, due to the
cyclical nature of the timber industry. "The market in the
second half is buoyant and stock levels are starting to reduce
as a result of the normal cyclical demand," he confirms.
"With such positive prospects for the second half of the year,
we expect to maintain our current growth rate," he concludes.
SSUED THE YORK TIMBER ORGANISATION LIMITED (YORK): 013 764
FOR: 9200
CONTACT: Lance Cooper, CEO: 083 227 4700 or John Lehman, CFO:
082 388 8998
FAX NO: 013 764 1164
E-MAIL Lance@yorkcor.co.za; john@yorkcor.co.za
WEBSITE www.yorkcor.co.za
ISSUED YORK Corporate and Investor Communications
BY:
CONTACT: Tish Stewart 011 442 5536 / 082 443 6399
FAX NO: 011 447 9317
E-MAIL: tishstewart@mweb.co.za
DATE : 26 September 2007
Date: 26/09/2007 13:24:49 Produced by the JSE SENS Department.
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