| Thu 1 Oct 2009, 7:05 | | YRK - York Announces Restructuring To Return Group To Profitability |
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YRK
YRK
YRK - York Announces Restructuring To Return Group To Profitability
YORK TIMBER HOLDINGS LIMITED
(formerly The York Timber Organisation Limited)
(Registration number 1916/004890/06)
Share code: YRK
ISIN: ZAE000133450
YORK ANNOUNCES RESTRUCTURING TO RETURN GROUP TO PROFITABILITY
SALIENT FEATURES
- Net asset value per share - 1,722 cents
- Tangible net asset value per share - 939 cents
- Debt and capital restructuring finalised
- R500 million capital injection recommended by Board
York Timber Holdings (York) today announced its 2009 annual results,
reporting a loss of R232 million for the 12-month period to 30 June 2009 (18
months to 30 June 2008: profit of R538.7 million).
The operating profit for the period was R135.8 million, compared to a profit
of R237,8 million for the previous 18month period. A major reason for this
drop was reduced sales volumes as a result of adverse trading conditions
relating to the recession.
The slowdown in economic activity in the South African timber and
construction sectors, which was already evident in the latter part of 2008,
became more pronounced during the second half of the period under review. The
rate of descent in new house construction, mortgage advances and demand for
timber products is reflective of the level of distress prevailing in the
economy in general. The Institute of Timber Construction`s statistics show a
17% decline in timber utilisation in plated roof trusses in 2008, mainly
attributable to the drop in domestic housing construction.
"Downward price pressure was also experienced due to excess capacity in the
sawmilling industry, a situation which has been exacerbated by the temporary
oversupply of lumber due to the salvage operations subsequent to the fires in
2007 and 2008," says York CEO, Piet van Zyl. "Given the state of the industry
as a whole, which saw the closure of several sawmills in recent months, it
was necessary to embark on a major restructuring process to align processing
capacity with current lower market demand."
In response to deteriorating market conditions, a decision was taken to close
two of the company`s older, less efficient sawmills and mothball a third.
This means York`s self-sufficiency in terms of own timber processed through
its mills (relative to bought out timber) is substantially improved. This is
positive for both cash flow and margins.
In addition to the mill closures, a group-wide cost-cutting exercise was
initiated during the latter part of 2008, which included retrenchments.
Further to this the salaried staff accepted a 10% pay cut, while lower paid
employees were awarded an increase of 8%. It is a credit to the staff of York
that they embraced the reality facing the group and remained committed and
loyal. Strategic management appointments have been made recently, resulting
in a further strengthened and focused management team," says Van Zyl.
The financial benefit of the restructuring and cost cutting exercise will
only be realised in the 2010 financial year, even though the restructuring
costs of R18.7 million and impairment costs of R43.3 million have been
included in the financial year ended June 2009. Net working capital reduced
from R156 million to R119 million mainly due to a decrease in accounts
receivable resulting from reduced sales volumes. As a consequence of the
closure of certain sawmills, production has been reduced to be in line with
market demand, which should see inventory levels decline further.
Financing costs totaled R197.9 million for the year under review (18 months
to 2008: R209 million), while total debt stood at R1.19 billion at financial
year-end. The group incurred additional debt during the previous financial
period in order to finance the acquisition of Global Forestry Products (GFP).
As part of the funding structure put in place for the acquisition of GFP,
York entered into an interest rate swap with a nominal value of R1.15 billion
to hedge itself against any increase in interest rates. This worked to York`s
benefit in 2008, when interest rates were higher, but did not result in any
material benefit to the group as interest rates declined. This swap is now
reflected as a R35.5 million liability, whereas it was shown as an asset of
R78.8 million in the previous period`s accounts.
The Board of Directors has approved the raising of at least R500 million by
way of a rights issue to reduce debt levels and, hence, financing costs. This
will also allow the group to unwind the interest rate swap currently in
place. On successful conclusion of the rights issue, assuming shareholder
support for the planned capital restructuring, the group`s total debt will
fall to roughly R700 million, and annual financing costs will be reduced by
40% of the current level. The saving in interest costs, coupled with a modest
recovery in product prices, will translate into a healthy bottom line
improvement. Some R450 million of the proceeds from the planned R500 million
rights issue will go to reducing debt, and the balance of R50 million to
strategic capital expenditure.
During the period under review, the Forestry division`s management team was
strengthened and controls throughout all operations were improved.
Van Zyl says the underlying value of York`s biological asset remains intact
and is one of the most pristine long-term rotation plantation assets in the
southern hemisphere. York continues to maintain its sought-after Forest
Stewardship Council certified plantations through the group`s tree breeding
facilities in its own nursery, modern forestry management practices and a
sustainable long-term harvesting regime. These measures all contribute to
continued improvement and ensure the sustainability of the biological asset.
Looking forward, Van Zyl says management`s objective is to maximise the
group`s profitability through optimisation of its processing plants, raw
material utilisation and market demand. Management will also continue to be
cost efficient, improving operational productivity and optimise working
capital.
"We are optimistic that once the balance sheet restructuring has been
concluded, shareholders will see the value of the group significantly
enhanced as York`s pre-eminent position in the industry is cemented."
Ends
About YORK
York Timber Holdings Limited (York or the Company), which is headquartered in
Sabie, Mpumalanga, is South Africa`s largest vertically integrated solid
wood products group, growing pine and eucalyptus on 61 000 hectares, and
converting logs to sawn timber through seven mills and a plywood plant to
serve a range of building, construction, infrastructure, furniture and
packaging markets.
ISSUED FOR : YORK TIMBER HOLDINGS LIMITED (YORK)
CONTACT : Piet van Zyl, CEO: 013 764 9200
FAX NO : 013 764 1164
E-MAIL : pvanzyl@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 : 30 September 2009
Date: 01/10/2009 07:05:03 Produced by the JSE SENS Department.
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