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The York Timber Organisation Limited
Reg. No. 1916/004890/06
("Yorkcor")
Preliminary Report for the year ended 31 December 2000
Abridged group income statement
31 December
2000 1999
Rm Rm
Operating profit before
finance cost, depreciation and
taxation 7 426 1 452
Finance cost (992) (1 966)
Depreciation (2 283) (2 551)
Taxation (300) (101)
Profit/(Loss) after taxation 3 851 (3 166)
Minority interests 403 (372)
Profit/(Loss) attributable to ordinary
shareholders 3 448 (3 538)
Headline profit/(loss) per ordinary
share (cents) 30,5 (32)
Number of ordinary shares in
issue (000's) 11 040 11 040
Statement of changes in shareholders' funds
31 December
2000 1999
Rm Rm
Shareholders' funds at beginning
of year 29 172 33 641
Profit/(Loss) for the year 3 448 (3 538)
Write off sawlog rights - (931)
Shareholders' funds at
31 December 2000 32 620 29 172
Net asset value per share:
331,7 cents (1999: 308,9 cents)
Abridged group balance sheet
31 December
2000 1999
Rm Rm
Assets
Non-current assets
Property, plant, equipment, vehicles
and intangibles 30 906 33 521
Long-term receivables and investments 8 417 8 527
39 323 42 048
Current assets 29 372 27 077
Total assets 68 695 69 125
Equity and liabilities
Issued capital 3 612 3 612
Non-distributable reserves 15 935 17 167
Distributable reserves 13 073 8 393
Ordinary shareholders' funds 32 620 29 172
Outside shareholders' interest
in subsidiary 4 000 4 000
Total shareholders' funds 36 620 33 172
Non-current liabilities
Interest bearing borrowings 11 625 10 683
Current liabilities 20 450 25 270
Total equity and liabilities 68 695 69 125
Commentary
Yorkcor did well to accomplish a turnaround of nearly R7,0 million in the year
2000. Attributable earnings amounted to R3,45 million compared with a loss of
R3,54 million in 1999. Headline earnings totalled 30,5 cents per share from a
loss of 32,0 cents per share in the previous year. Our improved profitability
was the outcome mainly of strategic niche positioning and boosted operational
efficiencies. Yorkcor's balance sheet ratios are sound. Our liquidity ratio
improved from 1,07 to 1,44 and gearing stood at 29,2% compared to 28,4% at the
end of the previous year. Our cost of finance was covered (5,18 times).
Turnover, at R67,68 million was better by only 8,4%. Yielding these substantive
improvements is indicative of more effective operational management. The market
hardly improved, however. Total lumber sales from the formal sawmilling sector
in 2000 was 1 157 902 m3 - a mere 1,5% up on 1 140 382 m3 for 1999. The bad
debt provision charged to profits in the accompanying accounts of R1,2 million
(1999: R0,2 million) is a sign of the times.
Cloud of uncertainty
The timber industry, on the whole, is not in good shape. For much of 2000 and
all of the year before, only one-third of sawmills were profitable. Formal
sector sawmills numbered 185 in 1985. They have been reduced to a mere 56
today. Sawmillers are the flower of providers of industrial jobs in the
platteland - that is where the need for jobs is most desperate. Clearly the
industry deserves a better deal from the government.
A cloud of uncertainty has hung over the industry ever since the programme of
privatisation of the state's forestry assets was announced six years ago.
Without security of tenure, sawmillers are unsure where to look for a future.
South African sawmillers are losing ground to competitors overseas and to
competing materials on the domestic markets. Robust lumber millers are ready to
play a worthy role in South Africa's thrust for socio-economic upliftment. Give
them the tools and they will do the job.
Against the wind
Yorkcor is amongst the survivors, along with the heavyweight conglomerates and
the deft niche operators. For us, survival is not enough - we are in business
to flourish.
This has called for tough decisions. Not the least has been standing up to the
challenges of the times. Thank goodness for the rule of law. Yorkcor was, and
is, not willing to pay the high price for uncertainty. For decades, South
African sawmillers relied on long-term sawlog contracts with the state to
anchor their locality bound industries. The sawmills were there because the
trees were there; neither were on wheels. In 1994, the South African Forestry
Company Limited (Safcol), (the parastatal that took over the nation's
commercial forests) began to coerce long term contractors to relinquish their
long-term rights.
The millers were required to convert their so-called "evergreen" entitlements
to what effectively amounted to three years' tenure. All except Yorkcor and two
others in the Eastern Cape succumbed to the pressure. Little wonder that log
prices began to rise exponentially - the market could hardly resist when the
seller could give them three years' notice to quit. Prices of most commodities
the world over rise and fall in sympathy with supply and demand. Not so
Safcol's log prices. Safcol was and is in a dominant market position. There
really is nowhere else to go for logs for erstwhile long-term contractors. They
are vulnerable to abuse of dominance.
Yorkcor did not follow the herd. We resisted the attack on our security of
tenure - an order of the High Court underpins the long-term nature of our
rights to resource. Last month we banked about R6,0 million in damages,
interest and costs consequent upon a Supreme Court of Appeal decision in our
favour against the government. The payment is not reflected in the accompanying
balance at 31 December 2000.
The attack on Yorkcor's security of tenure has been launched from more than one
source. The Minister of Water Affairs and Forestry has been approached by
certain officials to initiate steps in terms of Section 28 of the National
Forests Act to give the group five years' notice of termination of its
long-term sawlog contract in respect of three forests in the
Bushbuckridge/Acornhoek region. The Minister has visited Yorkcor's operations
there last month, including the upliftment work it does in the neighbouring
communities. Your directors do not think there is any substance in this
predatory action or that it could pass muster against the protection of the
Bill of Rights that guarantees reasonable compensation for expropriation.
For its part, Safcol has twice repudiated our long-term sawlog contracts, once
in November 1998 and again in September 2000. It seeks the court's sanction for
these purported terminations as well as for what it calls an "ad hoc
arrangement" in terms of which it unilaterally charges the high prices imposed
on most other sawmillers. These actions will be heard in the course of 2001.
Our legal advisors are cautiously optimistic.
On the other hand an arbitration award on the revision of log prices from 1995
favoured Safcol.
Litigation is pending in the High Court on contractual disputes and, in April
2001, the Competition Tribunal will hear our complaint against Safcol which has
threatened to cut down on our log supplies. Yorkcor has sought to restrain
SAFCOL by way of an interdict on the basis of abuses of its dominant market
position. The issues in the pending legal proceedings are complex and to say
more may offend the sub judice rule.
Suffice it to say that we are prepared against the possibility of an adverse
outcome by way of appropriate provisions in the accompanying financial
statements. Our cause is just and your directors believe it is realistic to
expect success.
Madiba Mills
Yorkcor takes great pride in the accomplishments of Madiba Mills in the year
under review. Madiba Mills is the empowerment enterprise it launched five years
ago to promote opportunity amongst the previously disadvantaged in the formal
sector of the lumber milling industry. It is the only black managed and
operated sawmill of its kind in South Africa. Yorkcor's funding for the project
totalled R8,84 million at the end of 2000, (1999: R9,59 million). It converted
an operating loss of R0,18 million in 1999 to a profit of R1,40 million in 2000
Your directors intend to keep Yorkcor's powder dry and so will not declare a
dividend for 2000. Yorkcor's annual report for 2000 will be published before
the end of May 2001.
By order of the board
Solly Tucker Dr Jurgen Kopp
Chairman Director
Report of the independent auditors
the financial information set out in this report has been reviewed, but not
audited, by the group's auditors, KPMG Inc.
Registered office Transfer secretaries
5th Floor Computershare Services Limited
Yorkcor Park 41 Fox Street
86 Watermeyer Street Johannesburg 2001
Val de Grace PO Box 61051
Pretoria 0184 Marshalltown 2107
PO Box 380
Pretoria 0001
Tel: (012) 804 9730
Directors
*S Tucker, *I S D Tucker, *A C Villiers, Dr J Kopp, S Motlana
*Executive
YORKCOR REPORTS R7M TURNAROUND DESPITE UNCERTAINTY OVER SAWLOG MARKET
PRESS RELEASE
Timber group Yorkcor notched up a R7 million turnaround for the year ended 31
December 2000, reporting attributable earnings of R3,45 million compared with a
loss of R3,54 million in 1999.
Headline earnings per share totalled 30,5c against a loss of 32c the previous
year.
This turnaround was achieved on an 8,4% rise in turnover to R67,68 million. The
liquidity ratio improved to 1,44 from 1,07 and gearing to 29,2% from 28,4%.
Yorkcor chairman Solly Tucker says the main reasons for the sharp improvement
in profitability, despite slow sales growth, were a change in strategic
positioning and higher operational efficiencies.
Formal sawmilling sector lumber sales in 2000 were a mere 1,5% up on 1999.
Market conditions remain tough. This is reflected in the bad debt provision of
R1,2 million from R0,2 million in the previous year.
"The timber industry, on the whole, is not yet out of the woods," says Tucker.
"Only a third of the country's sawmills have recorded regular profits over the
past two years. Formal sector sawmills numbered 185 a dozen or so years ago.
They have been reduced to a mere 56 today."
A cloud of uncertainty has hung over the industry since government announced
its intention to privatise state forestry assets six years ago.
"Without security of tenure, sawmillers are unsure where to look for a future.
South African sawmillers are losing ground to competitors overseas and to
competing materials in domestic markets," says Tucker. "Yorkcor is amongst the
survivors, along with the heavyweight conglomerates and the deft niche
operators.
"For us, survival is not enough - we are in business to flourish."
Yorkcor was one of just three timber millers in SA to resist attempts by the
forestry parastatal Safcol to relinquish their entitlement to 'evergreen'
sawlog supply contracts. The majority yielded to the pressure, triggering an
exponential rise in log prices. Only in South Africa have log prices been
increased regardless of supply and demand in the timber market. Yorkcor took
its case to the High Court, which enforced the long-term nature of its
contracts. "By and large we have succeeded in protecting our profitability
against excessive price rises through the courts," says Tucker.
Last month Yorkcor banked about R6 million in damages, interest and costs after
a Supreme Court of Appeal decision against the government. The payment is not
reflected in the latest results.
However, the battle for security of tenure is not yet over, adds Tucker. "The
Minister of Water Affairs and Forestry has been approached by certain officials
to give Yorkcor five years' notice of termination of its long-term sawlog
contract for three forests in the Bushbuckridge/Acornhoek region in terms of a
provision in the National Forests Act. Such predatory action is unlikely to
"pass muster against the Bill of Rights that guarantees everyone protection
against deprivation or expropriation without fair and reasonable compensation
."
Safcol has twice attempted to repudiate Yorkcor's long-term sawlog contracts.
This includes a unilateral attempts to raise prices substantially. These
actions will be heard in the courts later in the year. "Our legal advisors are
cautiously optimistic," says Tucker.
An arbitration award on the revision of log prices from 1995 favoured Safcol.
Other actions are pending against Safcol, one relating to contractual disputes
which will be heard next month in the High Court, and another by the
Competition Tribunal following complaints by Yorkcor that Safcol threatened to
cut its log supplies. Tucker is confident of positive outcomes in both cases.
On a more positive note, the Madiba Mills project launched four years ago by
Yorkcor to promote opportunities for blacks in the formal sawmilling industry
has been an outstanding success. Madiba Mills is the only black managed and
operated sawmill of its kind in South Africa and converted an operating loss of
R179 577 in 1999 to a profit of R1,4 million in 2000.
"Your directors intend to keep Yorkcor's powder dry and so will not declare a
dividend for 2000," concludes Tucker.
Ends
ISSUED FOR : Yorkcor Limited
CONTACT : Solly Tucker (012) 804 9730 / 083 456 9900
FAX NO: : (012) 804 8611
E-MAIL : sol@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 : 28 March 2001
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