| Tue 25 Mar 2008, 12:28 | | YRK - The York Timber Organisation - Integration Of Acquistion Boosts York`s |
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YRK
YRK
YRK - The York Timber Organisation - Integration Of Acquistion Boosts York`s
Results
The York Timber Organisation Limited
(Registration number 1916/004890/06)
Share code: YRK
ISIN: ZAE000008108
("York" or "the Company" or "the Group")
INTEGRATION OF ACQUISTION BOOSTS YORK`S RESULTS
HIGHLIGHTS
- Revenue up 136% to R929 million
- EBITDA up 267% to R152,7 million (2006: R41,6 million)
- Operating profit up 540% to R270.6 million (2006: R42.3 million)
- Log and lumber prices substantially up in long term SA timber shortage
- Fair value adjustment to plantations of R239.9 million
- Fully diluted headline earnings per share up 20% to 323,4c (2006: 268.5c)
- Cash generated by operations grew 654% to R60.4 million (2006: R8 million)
- Global Forest Products acquisition completed in July 2007, making York the
largest integrated forestry and sawmilling company in South Africa
- BEE ownership increased to 27%
Forestry products group York has produced robust results for the 12-month
interim period to December 2007, despite rapidly escalating raw material (saw
log) prices and a modest slowdown in the demand for timber finished products
(lumber). During the period, the integration of Global Forest Products (GFP)
was completed and revenue rose 136% to R929 million (2006: R394 million), while
profit from operations grew 540% to R270.6 million (2006: R42.3 million).
Headline earnings per share were 335c, up 25% over 2006 (268.5c). After
accounting for the fully convertible preference shares issued in two BEE
transactions in February 2007, fully diluted headline earnings per share
improved by 20% to 323,4c (2006: 268.5c).
In the period, York`s plantations were revalued by R239 million, based on the
standing value method.
As a result of the severe plantation fires experienced in 2007, York`s uninsured
losses amounted to R106 million, comprising fire damage to plantations, fire
fighting costs and damage to stock.
Gearing increased to 44,1% from 10.7% in December 2006, due to finance raised to
make the GFP acquisition. This finance expense will reduce as the balance sheet
degears.
Commenting on the results, York CEO Lance Cooper says, "York`s acquisition of
GFP has significantly changed the size and nature of the company and has
resulted in significant increases in revenue and operating profit. We now own
sufficient forestry resources to satisfy at least 65% of our own timber
requirements. A single, solid platform to manage 60 000ha of plantations, eight
sawmills, a plywood mill and a national warehousing network has been built and,
with integration complete, we are focused on improving efficiencies and
unlocking operational synergies, with major gains expected to be achieved in the
next three years."
Market conditions
Turning to market conditions, Cooper says, "The slowdown in domestic
construction has impacted the lumber market, with the value of residential
building plans passed for 2007 rising by only 5.3% over the previous year.
However, home improvements showed strong growth at 11%. In the period, South
African lumber output declined by 2.5% as a result of reduced raw material
supplies, which partially compensated for slowing market demand. Demand for
plywood is increasing as the construction of stadiums, bridges, hotels and power
stations gains momentum."
From now until 2036, industry analysts Crickmay and Associates have forecast
annual lumber shortages ranging between 20% and 50% per year. Cooper says these
shortages have been compounded by the fire destruction of large plantation areas
during 2007.
In the period, Komatiland Forests (KLF) continued to close the gap between long
term contract saw log prices and spot market prices by raising long term prices
by 20% in April and a further 14% in September. The long term domestic shortage
of lumber will mean that South Africa will need to import a large portion of its
requirements. "Local prices are expected to rise until import parity is reached
and thereafter to track exchange rates and international lumber prices," says
Cooper. "Import parity on sawn timber is estimated to be 20% above current
prices at an exchange rate of R7.80 to the US dollar. By April 2008, long-term
prices will be 36% below spot prices. While the closure of the gap between long
term and spot prices is expected to result in import parity being achieved, any
further weakening of the rand will raise import parity levels further and result
in further timber price increases."
Strategy and prospects
Cooper says that with the GFP acquisition York has achieved its vision of
securing a sustainable resource supply. "The inherent value of the plantations
provides good investment underpin, with the short to medium term outlook for
investment growth positive as log prices rise and processing efficiencies and
synergies are unlocked.
During the period, York completed a R350 million rights offer to fund the GFP
acquisition and a R203 million issue of shares for cash to finance working
capital for the merged group. As a consequence, the number of ordinary shares
in issue increased from some 11 million to some 78 million and liquidity
improved dramatically. Cooper says that in response to market demand, York
intends to take measures to further increase liquidity in the future.
On acquisitions, he says, "York has the scope and capacity to acquire additional
plantations to further reduce its dependence on third parties for resources and
will continue to seek such acquisitions. A medium term goal is the acquisition
of complementary international companies in order to import York`s requirements
in the substantial shortfall of timber predicted for South Africa."
In conclusion, Cooper says that the prospects for the second half of the year
are positive and York expects to maintain its current growth rate as operational
efficiencies improve and saw log prices continue to rise.
SSUED FOR : THE YORK TIMBER ORGANISATION LIMITED
(YORK): 013 764 9200
CONTACT : Lance Cooper, CEO: 083 227 4700
FAX NO : 013 764 1164
E-MAIL : lcooper@york.co.za
WEBSITE : www.york.co.za
ISSUED BY : YORK Corporate and Investor Communications
CONTACT : Tish Stewart 011 442 5536 / 082 443 6399
FAX NO : 011 447 9317
E-MAIL : tishstewart@mweb.co.za
DATE : 25 March 2008
Date: 25/03/2008 12:28:49 Produced by the JSE SENS Department.
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