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York Timber Holdings Limited
Incorporated in the Republic of South Africa)
(Registration number 1916/004890/06)
Share code: YRK
ISIN: ZAE000133450
('York' or the 'Company')
TRADING AND OPERATIONAL UPDATE FOR THE FIRST QUARTER OF THE
2021 FINANCIAL YEAR
Highlights
' Return to profitability 6 times that of the year ended
June 2020 and 1.4 times that of the first quarter of the
2020 financial year ('Q1 2020')
' Land Bank covenant rectified
' Demand for lumber strong and prices are holding up
' Local demand for plywood on the increase on the back of
strong demand for export products
' Cost control and optimisation of supply chain components
keep cost increases minimal
' Stable log supply to processing plants with a strong
performance by the forestry division
' Stable labour relationship
' Reduced debt by further R28 million from the year ended
June 2020(R38 million reduction in debt compared to Q1
2020).
Operational update
York returned to full production at all its operating sites
as from 1 July 2020. Start-up of operations was gradual to
ensure adherence to COVID-19 protocols.
With strong demand for York's products, the focus is for
processing plants to run optimally. Sawmilling operations had
their challenges during the first quarter but ended with sales
volumes at 108% of production (Q1 2020: 101%). Sales volumes
for the quarter are at 28% of the prior financial year's total
sales volumes (Q1 2020: 29%). Average selling prices improved
by 5% over the quarter from the year ended June 2020 and 2%
from Q1 2020.
Plywood demand for local and export markets has been strong.
Sales of plywood were 120% of production for the quarter (Q1
2020: 117%), resulting in a reduction in stock. Plywood sales
volumes for the quarter are already 36% of the total sales
volumes for the prior financial year and 22% of the total
sales volumes for Q1 2020. Average selling prices have also
improved by 6% over the quarter from the year ended June 2020
and 3% from Q1 2020.
The Nicholson & Mullin sawmill has successfully been closed
and working with organised labour; retrenchments were kept to
a minimum. York deployed more than two-thirds of affected
employees in the rest of the operations.
Relations with organised labour has been stable. We continue
to promote a positive industrial relations climate and
improved employee relationships.
The Forestry division performed exceptionally with reasonable
cost control and improved forestry management systems.
Outside log procurement is kept to a minimum with a clear
focus to improve supply from own plantations. External log
prices in Mpumalanga have reduced but are still at a 20%
premium to the rest of South Africa.
Covenants and Land Bank
The interest cover ratio, as measured in June 2020, fell below
the required level as a direct result of the national lockdown
('lockdown') with the outbreak of COVID-19. York comfortably
met the covenant ratio before the lockdown. York informed
Land Bank well in advance of a potential breach and requested
a waiver before June 2020. York obtained the waiver, but Land
Bank elected to charge penalty interest for the quarter to
September 2020.
At the measurement period, September 2020, the interest cover
ratio was 5.18 times against the required 2 times, and Land
Bank is no longer in a position to demand penalty interest.
York requested Land Bank to release excess security held under
the loan agreements. The current security cover of 3.76 times
is well above the required 1.5 times.
Cash flow and financial performance
York generated positive cash flow over the first quarter with
debt reducing by a further R28 million for the year ended
June 2020(R38 million reduction in debt compared to Q1 2020)
and R23 million was contributed to the York self-insurance
fund (Q1 2020: R8 million). The net increase in cash has been
R12.5 million for the quarter from the year ended June 2020
(R99 million decrease in cash compared to Q1 2020).
Costs have been reduced, with the costs for the quarter being
16% lower than the comparative quarter a year earlier, and
29% of total costs for the prior financial year that included
the lockdown.
EBITDA for the quarter was 607% higher than that of the year
ended June 2020 (Q1 2020: 16% higher than that of the year
ended June 2019).
Investment in research to pave the way for advanced engineered
wood product application
York signed a funding agreement with the University of
Pretoria (UP) to establish a transdisciplinary Chair in data-
driven, wood structural engineering for a sustainably built
environment and African bio-economy. This partnership will
establish a transdisciplinary research programme focused on
the entire innovation chain from genome-based breeding to the
structural engineering of advanced engineered wood products.
Key deliverables are:
- the development of undergraduate teaching modules in
wood structural engineering for advanced engineered wood
products;
- collaborate with and consulting major construction
companies to use engineered wood as the preferred
building material for building projects, including and
not limited to multi-storey buildings and apartments;
- developing appropriate engineering, safety and building
codes for construction using engineered wood products;
and
- promoting and acting as a leading voice for the
application of engineered wood products as sustainable
building materials in Africa through initiatives that
encourage businesses to engage with the Chair through
participation in short courses, seminars and symposia.
Outlook
York foresees that the current robust demand will continue
into the next quarter. Improving production throughput and
efficiencies are key focus areas to ensure York benefits from
current high demand.
The diversification of earnings and utilisation of York's
assets to return value to shareholders are being pursued and
progressing well. York will establish its first high yield
soft citrus crop during the next quarter and has aligned
itself with the leading companies in this sector to assist
with choosing varieties, technical expertise and marketing of
fruit. York further envisages concluding the acquisition of
an adjacent farm that is fully operational to unlock the full
value of the soft citrus development.
The management of York's forestry, processing and
distribution business remains the critical focus. The
agriculture division is staffed with knowledgeable industry
experts.
Shareholders are advised that the information, including any
forecast financial information, included in this announcement
has not been reviewed or reported on by the Company's auditors
and is the responsibility of the directors of the Company.
Sabie, Mpumalanga
16 October 2020
Sponsor
One Capital
Date: 16-10-2020 11:55:00
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