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YRK - York Timber Organisation Limited - Press Release

Release Date: 27/02/2007 15:17
Code(s): YRK
Wrap Text

YRK - York Timber Organisation Limited - Press Release 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") Yorkcor posts best ever annual results in near 100-year history HIGHLIGHTS * Headline earnings per share up sixfold to 263c from (2005: 45c) * Gross profit up by 17% to R153 million (2005: 129 million) * Operating profit up by 50% to R42,2 million (2005: R28,2 million) * Revenue up 39%, R394 million (2005: R284 million) * BEE transaction finalised * Second forest acquisition concluded * Tender process participation to acquire controlling interest in Global Forest Products Forestry products group Yorkcor has delivered an excellent set of results for the year to December 2006, posting a 484% increase in headline earnings per share, from 45 cents in 2005 to 263 cents in 2006. Gross profit improved by 17% to R129 million (2005: 153 million) on a 39% rise in revenue to R394 million (2005:284 million). Profit from operations climbed 50% to R42,2 million (2005: R28,2 million). The year also marks a new era for Yorkcor, which was formed in 1916 and listed on the JSE in 1946. Control of the company is to pass to Luxembourg-based Blackstar Investors plc, with a further 26% earmarked for BEE shareholders and the board of directors has been restructured. On the board, CEO Ivor Tucker becomes non-executive chairman, replacing Dr Tienie van Vuuren. Two non-executive directors, Dr Jurgen Kopp and Poenkie de Villiers, stand down and Blackstar`s Jim Myers, Andrew Bonamour and William Marshall-Smith join the board. Earlier in the year Nthato Motlana resigned from the board, with his place filled by Gay Mokoena. Sally Motlana remains a non-executive director. The executive directors are Chief Operating Officer Lance Cooper, who takes over as CEO from Ivor Tucker, and Financial Director John Lehman. Putting the results in context in terms of the market, Cooper says the exceptional demand for timber in 2005 changed into a softer market in 2006 and softwood lumber sales for formal sawmills decreased by approximately 8%. "This was mainly due to two substantial log price increases and higher interest rates," says Cooper. "The industry was flooded with timber and prices were under pressure throughout the year. The flexibility of our sawmilling operations, however, ensured that our full production was sold, with stock turn-over improved." Against this backdrop, Cooper says the leap in Yorkcor`s operational performance was due to organic growth in all divisions. "Although timber markets were generally softer, the company`s performance was a good deal stronger, with gains in margins throughout the group," he says. Commenting on the operations, Cooper says, "All five sawmilling operations again contributed a profit, with an 18,3% growth in income achieved over the previous year`s performance. Sawn lumber prices escalated by 23% during the year, with roadside log price escalations soaring by some 54%.Despite this, the Sawmilling division managed to boost income generated." On forestry, Yorkcor reported the Taurus forest, acquired in 2005, to be on track. In addition, the company reached agreement with Crocodile Valley Estates (Pty) Limited for the acquisition of its business, Goedgeloof Plantation, as a going concern for a consideration of R32,3 million. The effective date of the acquisition was 22 February 2007. "The acquisition is viewed as strategically important by the board as it makes Yorkcor less reliant on third-party sources of sawlog supply," Cooper points out. On the Merchandising Division, Cooper says the Group has expanded into the KwaZulu-Natal market. In the year under review, Yorkcor commenced value adding operations, having identified the need to diversify its sawmilling product range. It now out-sources matching products for trade. Yorkcor`s Madiba Forest Products plant manufactures value added timber products supplied to the company`s existing customer base. The objective of this operation is to organically expand Yorkcor`s product range, utilising its own timber resources and those of other suppliers to produce products further down the value chain. The strategy is to add value to rough sawn lumber to meet the growing needs of Yorkcor`s broad customer base and identify further value added timber products to boost profitability. During 2006 Yorkcor expanded and strengthened its alliance with various sawmillers, in one instance entering into an alliance agreement with The Wattle Company of Zimbabwe in terms of which the company was appointed the sole distributor of its entire production. On the Environment, Cooper says, "Yorkcor maintains, as a minimum, those standards required by the Department of Environmental Affairs. Treatment plants comply with the latest SANS specifications and Yorkcor participates in a number of recycling projects. Our sawmills have internationally accredited Forestry Stewardship Council (FSC) certification which forms part of the chain of custody between environmentally well managed plantations, processors and conscientious consumers." Dividend Taking into consideration the acquisition of forests and the company`s overall growth strategy, no dividend has been declared for the year under review. Looking ahead Except for North America, where the decline is expected to correct around mid 2007, offshore markets are again buoyant and increased consumption and an expansion in the production of timber products of approximately 5% is projected for 2007. "For Yorkcor, the challenge is to identify the key drivers of softwood consumption in global markets - although the feasibility of exports is restricted by prevailing exchange rates, global supply and demand dynamics could have a material impact on lumber prices," says Cooper. He says the company intends to follow a growth strategy, both generically and looking to local and international acquisitions and Yorkcor is currently in a tender process to acquire 70% of Global Forest Products (GFP). GFP consists of a valuable forestry asset of some 57 000 ha of plantations, as well as three sawmills and one plywood mill. The successful bidder is expected to be announced during March. As regards its JSE listing Cooper says Yorkcor is committed to remaining listed. "A listing is the ideal vehicle for growth and it is expected that with the change in shareholding control, the free float on the JSE will increase significantly to the benefit of shareholders." Cooper concludes by saying, "Overhanging market sentiment is rampant consumer spending, the rising tide of interest rates, and consequent leveling off in new housing. Yorkcor nevertheless expects to remain ahead of the pack. This will be achieved despite the rising spiral of sawlog costs, by continuing to keep a tight rein on expenses and fine-tuning margins and efficiencies. The business is running on well-oiled wheels and our outlook is upbeat for the year ahead." Ends ISSUED FOR: YORK TIMBER ORGANISATION LIMITED: 012 804 9730 CONTACT: Lance Cooper, Chief Operating Officer: 083 227 4700 or John Lehman, Financial Director: 082 388 8998
FAX NO: 012 804 8611 E-MAIL: Lance@yorkcor.co.za; john@yorkcor.co.za WEBSITE: www.yorkcor.co.za ISSUED BY: Letsema Communications CONTACT: Tish Stewart 011 325 4195 / 082 443 6399 FAX NO: 011 325 4199 E-MAIL: tish@letsemacom.co.za DATE: 27 February 2007 Date: 27/02/2007 15:17:03 Supplied by www.sharenet.co.za Produced by the JSE SENS Department.

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