| Wed 23 Mar 2005, 12:02 | | Yorkcor posts seven-fold increase in heps |
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Yorkcor posts seven-fold increase in headline earnings per share
The York Timber Organisation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1916/004890/06)
Share code YRK ISIN ZAE000008108
(`Yorkcor` or `the company`)
Press Announcement
SPECIAL DIVIDEND OF 125c DECLARED
Business conditions for sawmillers are the best they`ve been in a decade,
fuelled by soaring housing demand and a resurgence in business confidence.
`Not for a decade have sawmillers had it so good,` says Yorkcor chairman Solly
Tucker, announcing a record set of financial results for the group. `Overall
demand for sawn timber grew 25% last year, with most of this demand coming from
the local building sector.`
This helped Yorkcor to post a seven-fold increase in headline earnings per share
(HEPS) to 82,9c for the year ended 31 December 2004 from 11,6c the previous
year.
Earnings per share (EPS) over the same period grew to 99,7c from 44,3c the
previous year (which excludes a non-recurring amount of 257,1c per share in
compensation received for the termination of the York Lumber contract in 2003).
After-tax profit doubled to R11,1 million (2003: R5,5 million) after a nearly
three-fold increase in the tax charge to R7,3 million (2003: R2,5 million). The
2003 profit figure excludes the aforementioned compensation of R28,4 million,
after provisions, received from government for termination of the York Lumber
contract.
There was a marked improvement in the strength of the group`s balance sheet,
which is now completely ungeared, as against gearing of 7,7% a year ago. Cash
value added in operations amounted to R98,8 million (2003: R34,9 million). The
cost of finance was covered more than 44 times (2003: 21,9 times) and the group
ended the year with cash in the bank totalling over R48, 7 million (2003: R5, 5
million).
Yorkcor announced a 125c special dividend, over and above the ordinary dividend
of 25c, to shareholders registered on Friday, 27 May 2005. The ordinary dividend
is four times covered by 2004 earnings.
`The special dividend will serve to enhance capital efficiency in the financial
structure of the group. Total dividends declared equate to about a third of our
cash chest, currently about R50 million,` says Tucker. `Looking forward, we have
powder enough for our planned strategies, acquisitions, secure log supplies and
development of BEE connections.`
These results are in line with an announcement of trading update published on 10
February 2005 to the effect that results were expected to show a marked
improvement over the previous year.
Tucker says sawntimber prices rose more rapidly than the Business Confidence
Index, while low interest rates stimulated demand for manufactured products such
as furniture and doors. The strong rand hurt exports, which Yorkcor approached
with caution, though the group continues to maintain and develop its overseas
trading connections.
One area of concern noted by Tucker is the over-felling of the country`s timber
resource to meet surging demand. The price of sawlogs will inevitably rise to
meet that of sawntimber. `Unlike the New Zealand, Australian, South American and
US governments, ours is not doing what it can, and should, to encourage
afforestation. The Lumber Price Index trend has been inexorably upward and
rising.`
Another area of concern is the supine response of most saw millers to the
government`s new forestry dispensation, which allows it to terminate supply
contracts on three years` notice. `Yorkcor`s strategy has been to do better than
that. In this it has substantially succeeded.`
This new dispensation contrasts with previous times when state forests provided
a stable supply of softwood sawlogs for independent private sector sawmills.
Yorkcor was compelled to resort to legal action to protect its supply contracts
it won a protracted legal case against state-owned forestry company Safcol to
secure its `evergreen` sawlog supply contracts in 2002, but this was overturned
on appeal by Safcol in September 2004. While Yorkcor can no longer count on the
pre-existing evergreen contracts to guarantee supply, it has since September
2004 bought a substantial volume of supply logs from Safcol at high spot market
prices. Should Safcol terminate this supply at any point, competition law rules
will come into question. In any event Yorkcor sources substantial volumes from
alternative suppliers who are willing and able.
Tucker says relations with the Department of Water Affairs (DWAF) have
normalised, having soured in recent years over the state`s refusal to honour a
High Court order to make a mandatory offer for the silvicultural operations on
three Lowveld plantations over which Yorkcor had rights, near Bushbuckridge in
Mpumalanga.
Tucker says of the remaining issues pending before the High Court, all but two
have been shelved indefinitely. One outstanding issue concerns a claim by Safcol
for increased prices and a counter claim by Yorkor for damages relating to an
averred breach of contract. Yorkcor`s legal counsel advises that a negative
outcome is unlikely.
In June 2004 the group banked a cheque for R37,4 million (accrued in the 2003
accounts) from government after winning a claim against it for cancellation of
York Lumber`s evergreen supply contract near Bushbuckridge. Though the evergreen
contract has been terminated, York Lumber will continue operating until December
2006, and in all likelihood for time after that. Discussions are underway with
government to continue York Lumber`s sawmilling operating after 1 January 2007,
while other sources of supply are being examined.
Tucker criticised the choice of the `Bonheur` consortium as the preferred bidder
for the control of Komatiland forests,. Bonheur is 70% controlled by Global
Forest Products, `an American fund which, according to its own publications, has
only short term objectives for its involvement in South Africa.` It is
noteworthy that the IDC holds 30% in Global and therefore 21% of the proposed
merger. Global already owns 57 000 ha of timberlands. Merging this with
Komatiland 116,000 ha would `bring into being a merger with concentrated market
power of great magnitude. The dominant group will not only control some 80% of
the raw material resource but also close to 40% of the processing capacity.`
`It is significant, moreover, that the government will indirectly control, by
way of its shareholdings, some 11% of the installed sawmilling capacity, which
will make it the third biggest player in softwood sawmilling in the region as
well as 31% of the sawlogs industry. That would make the government the second
biggest player in the industry in the region - hardly a process of
`privatisation`. This outcome would, of course, run counter to declared policy.
This capacity should be placed in the hands of smaller independent private
sawmillers and sawlog growers`.
Fortunately, says Tucker, the proposed merger must pass muster with the
competition authorities. It is regrettable that the runner-up bidder for
Komatiland, a consortium led by Paharpur of India, has not been called in for
negotiations.
Looking to the future, Tucker says efforts must be made to address the sawlog
supply-demand imbalance, given the years it takes to replenish timber resources.
Yorkcor is negotiating the acquisition of an established forest resource in
which BEE participants will play a key role. Additional funding may be raised,
as required, on the JSE to finance this and other possible acquisitions.
`We nevertheless are confident that, given the current situation, the long term
growth and profitability of the group is assured,` says Tucker. `Yorkcor does
not strive to be the biggest in our industry but we strive to be the best. We
have more experience than most other softwood sawmillers, a dedicated board and
management and we are already a low cost producer as reflected in inter-firm
comparison studies, despite the price we pay for logs for the time being. We
will be concentrating on profitable niche-markets locally and overseas and we
have the partners and financial and other resources to make our vision a
reality.`
Ends
About Yorkcor
Yorkcor is a forest products enterprise listed on the JSE Securities Exchange
SA. It is one of the most experienced and efficient sawmilling companies in
South Africa, adding value to wood through creative applications and strategic
focus on niche markets at home and abroad. The company also successfully markets
timber products locally and overseas. Yorkcor timber is manufactured strictly
from plantations which are renewable resources.
Yorkcor employs over 1 000 people and turnover in 2003 was R117 million.
Incorporated in 1916 as Katzenellenbogen Limited, the company`s shares have been
listed on the JSE since 1946.
ISSUED FOR: YORK TIMBER ORGANISATION LIMITED
CONTACT : Solly Tucker, Chairman: 012 804 9730 / 083 456 9900
FAX NO : 012 804 8611
E-MAIL : solly@yorkcor.co.za
WEBSITE : www.yorkcor.co.za
ISSUED BY : TISH STEWART PR ASSOCIATES
CONTACT : Tish Stewart 011 325 4195 / 082 443 6399
FAX NO : 011 325 4199
E-MAIL : tish@tspr.co.za
DATE : 23 March 2005
Date: 23/03/2005 12:00:09 PM
Produced by the JSE SENS Department
