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THE YORK TIMBER ORGANISATION LIMITED
Reg. No. 1916/004890/06
JSE Share code: YRK
ISIN code : ZAE000008108
Audited Results for the year ended 31 December 2001
Abridged group income statement
31 December
2001 2000
R000 R000
Operating profit before finance cost,
depreciation and taxation 5 759 7 426
Finance cost (1 410) (992)
Depreciation (2 181) (2 283)
Taxation (224) (300)
Profit after taxation 1 944 3 851
Minority interests (387) (403)
Profit attributable to
ordinary shareholders 1 557 3 448
Headline profit per
ordinary share (cents) 13,7 30,5
Number of ordinary shares
in issue ('000) 11 040 11 040
Reconciliation of Headline Earnings per Share to Earnings per Share
31 December
2001 2000
HEPS 13,7 30,5
Surplus on disposal of Equipment
and Vehicles 0,4 0,7
EPS 14,1 31,2
Abridged cash flow statement
31 December
2001 2000
R000 R000
Net cash inflow/(outflow)
from operating activities 4 030 (368)
Net cash inflow from
investing activities 136 482
Net cash (outflow)/inflow from
financing activities (1 297) 646
Net increase in bank balances
and cash 2 868 760
Bank balances and cash at
beginning of year 811 51
Bank balances and cash at
end of the year 3 679 811
Abridged group balance sheet
31 December
2001 2000
R000 R000
Assets
Non-current assets
Property, plant, equipment, vehicles
and intangibles 28 857 30 906
Long-term receivables and investments 10 777 8 417
39 634 39 323
Current assets 26 407 29 372
Total assets 66 041 68 695
Equity and liabilities
Issued capital 3 612 3 612
Non-distributable reserves 15 079 15 935
Distributable reserves 15 486 13 073
Ordinary shareholders' funds 34 177 32 620
Outside shareholders' interest
in subsidiary 4 000 4 000
Total shareholders' funds 38 177 36 620
Non-current liabilities
Interest bearing borrowings 10 918 11 625
Current liabilities 16 946 20 450
Total equity and liabilities 66 041 68 695
Statement of changes in shareholders' funds
31 December
2001 2000
R000 R000
Shareholders' funds at
beginning of year 32 620 29 172
Profit for the year 1 557 3 448
Shareholders' funds at
31 December 2000 34 177 32 620
Net asset value per share: 345,8 cents (2000: 331,7 cents)
Commentary
Strategically, Yorkcor is in a much better place than it was a year ago,
despite the drop in attributable profits from 31,2 cents to 14,1 cents per
share. One in four sawmills in the formal sector operated at a loss last
year. In the teeth of fierce competition, customers on average paid 11,5%
more for Yorkcor lumber products during 2001 - a year in which the
industry's lumber price increased by only 2,6%. Merit was the measure. We
effectively neutralised the adverse impact of much higher log prices paid to
SAFCOL and our margins improved appreciably. We have retired nearly one-
tenth of interest bearing loans and ended the year with over R3,6 million in
the bank and sound balance sheet ratios. These results should be
contextualised against the march of events in our industry. Sustainable
growth in shareholder value in the long term was our main focus.
Minister's helicopter visit - January 2001
This time last year the Minister of Water Affairs and Forestry visited
our group's operations in the Lowveld. Of particular interest was the York
Lumber sawmill in the Acornhoek/Bushbuckridge region which, since 1970, has
relied on an evergreen contract with the government for its raw material.
His officials had sought to invoke section 28(5) of the National Forests Act
of 1998 which empowers the Minister to extinguish long-term sawlog
agreements on five years notice. York Lumber is one of the largest and most
stable providers of jobs in the region. Additionally we finance and manage a
number of social upliftment programmes there to promote practical and
sustainable self-employment in a locality where a livelihood is hard to
find.
The Minister found no evidence to justify a termination of our evergreen
contract. The pressure to remove our long term sawlog contract, however, was
unrelenting and survived his positive findings. The supplying forests had
been badly managed by the Department over the years. Yorkcor had been
insistent on performance. Moreover, our entrenched tenure vis- -vis the
resource was complicated by the privatisation process. Most other sawmillers
had voluntarily relinquished their long-term supply entitlements. None has
secured an effective contract duration of longer than three years. Most are
at three months' notice of termination. That, together with the quantum leap
in sawlog prices, was unacceptable to us. Our resistance has led to a series
of litigation since 1994, most of it successful although unquestionably
disruptive.
Many sawmillers have had to close their mills in consequence of these
impositions to make way for privatisation of the resource. Yorkcor's three
evergreen contracts (the other two are with SAFCOL) are unique in
underpinning security of sawlog supply. That is of great worth to
shareholders. Logs are the life blood of any sawmill.
Orders of the High Court and the Supreme Court of Appeal
Last year Yorkcor banked about R6 million from the government in
satisfaction of a judgment of the Supreme Court of Appeal delivered in
December 2000. The payment was for damages, interest and costs arising from
the undersupply of sawlogs in breach of our evergreen contract. In a
separate judgment, the Supreme Court of Appeal confirmed a declaratory order
enjoining the government to make a strategic five yearly quantified offer of
supply in terms of our evergreen contract. This it had persistently failed
to do. Earlier, a consent order granted by the High Court in 1997, which
enforced certain government undertakings and obligations, plainly spelt out
standards of silvicultural practice. Disputes, however, still endure. They
concern honouring and performing various orders of court. Currently,
proceedings for contempt of court are pending, at the instance of Yorkcor,
against the Minister and his Director-General for failing to take the
necessary steps to honour certain court orders.
Reasonable and adequate compensation
Finally, in December 2001, the Minister gave five years' notice of
termination of the York Lumber contract to convert the timberlands into a
conservation area - ostensibly in the public interest. The group's
entitlement to compensation has been recognised by the government. A
professional estimate by a firm of international standing estimates the
amount of compensation at several times greater than the amount initially
offered by the government. Should negotiations fail to result in agreement
by 30 June 2002, the amount of compensation must be settled by arbitration
by this year end and the entire amount of compensation must be paid by the
government before 30 June 2004 on the basis of the value of our York Lumber
business as "a going concern . . . enjoying the benefits of the contract
without interruption. The intention is to place (York Lumber) in at least
the same financial position as if the contract had not been terminated". The
italicised quotation are taken from the contract itself.
In the meantime the government would like to have York Lumber continue
sawmilling operations in the Bushbuckridge area for at least five years,
providing jobs and administering its socio-economic upliftment programme in
the area. We are negotiating the basis on which the company would do this.
SAFCOL litigation
Members were advised of litigation before the Competition Tribunal and
High Court against the parastatal, SAFCOL, in previous Yorkcor annual
reports. Pending is the outcome of a three week trial which ended earlier
this month in which SAFCOL also sought to invalidate two evergreen sawlog
contracts concluded in 1968 and 1970, respectively. We do not think that
there would be this kind of attack upon our supply entitlements were it not
for the privatisation process that is underway. We are prepared for the
changes that may arise in our industry dynamics.
Madiba Mills
Madiba Mills (Pty) Limited was launched in 1996 to promote a meaningful
participation by black entrepreneurs in the timber industry and to nourish
alliances with independent operators of influence. A controlling portion of
Madiba's equity was lodged with leading merchant bankers with a view to its
distribution, when the time was ripe, to previously disadvantaged people or
groups that could add value or generate synergy. The time should soon be
ripe. The investment in Madiba is carried in the group balance sheet at fair
value. A professional firm of valuers of high standing has valued the equity
of Madiba at amount which is appreciably greater than cost. Madiba has made
good profits over the past two years. As I write, its business flourishes.
Its control is ready for disposal to shareholders worthy of the opportunity
including its workers, trade unions and other target groups.
Outlook
We expect the timber industry to do much better in 2002. By attrition and
uncertainty in the locust years since 1994, Its supply capacity has been
thinned out. The survivors, like Yorkcor, know which way to go and have
begun to get there. Consideration will be given to a bonus pay out a of
portion of the compensation for our York Lumber evergreen contract. We
expect the receivable to be realised will be substantial. Primarily,
however, your directors' quest will be for a fresh investment in timber
conversion and marketing, especially exports. This is what we know and what
we do. Our business connections world wide and our group's know-how, built
up over our eighty-six years in business, will be brought to good account in
the new structure for Yorkcor.
2001 Annual report and price sensitivity
Our audit for 2001 is complete. Abridged figures are given in the
accompanying report. Your director's have decided against declaring a
dividend at this stage. It is customary for Yorkcor to publish its annual
reports within a few weeks of its financial year end. We have decided to
publish our annual report later, probably in May or June 2002, in the light
of the major developments referred to in this preliminary report.
By order of the board
Solly Tucker Dr Jurgen Kopp
Chairman Director
Report of the independant auditors
The financial information set out in this report has been audited by the
group's auditors, KPMG Inc.
BASIS OF ACCOUNTING
These consolidated, abridged interim financial statements were drawn up in
compliance with South African Statements of Generally Accepted Accounting
Practice and the company has complied with the requirements of the Companies
Act.
ACCOUNTING POLICIES
The accounting policies as set out in the 2000 Annual Report have been
consistently applied in producing these results.
Registered Office Transfer Secretaries
5th Floor, Yorkcor Park Computershare Services
86 Watermeyer Street 41 Fox Street
Val de Grace, Pretoria 0184 Johannesburg 2001
PO Box 380, PO Box 61051
Pretoria 0001 Marshalltown 2107
Sponsor
Sasfin Bank Limited
(Registration number 1951/002280/06)
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