To view the PDF file, sign up for a MySharenet subscription.

YRK - York Announces Restructuring To Return Group To Profitability

Release Date: 01/10/2009 07:05
Code(s): YRK
Wrap Text

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 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

Share This Story