York Timbers swings to profit of R136m

Lumber and agriculture company York Timbers has swung to profitability for the financial year ended June 30, having reported a R136-million profit against a loss of R312-million in the prior financial year.  

The group’s operating profit increased from a loss of R393-million in the 2023 financial year to R227-million in the reporting year.

The company did, however, report a decrease in its adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of R19.7-million to R90.6-million in the year ended June 30.

This follows a R161-million decrease in adjusted Ebitda in the 2023 financial year.

York Timbers’ net debt totalled R406-million at the end of June.

Cash generated from operations decreased by R99-million to R28-million in the year under review.

The company’s earnings a share, however, increased to 29.34c, compared with a loss a share of 77.43c reported for the prior year.

The group’s profit margins have been under pressure owing to market conditions and production costs in the last few years, but CEO Gerald Stoltz is confident that the group’s efficiency improvements, as well as the ability to increase lumber pricing, will result in better profitability.

York Timbers has two sawmilling operations in Sabie and Warburton, in Mpumalanga, as well as a plywood plant in Sabie.

The group grows pine and eucalyptus trees, with a fleet solutions division that owns heavy motor vehicles that are used to transport logs.

Moreover, the group has five distribution centres located in Germiston, Polokwane, Gqeberha, Durban and Cape Town that sell timber products from the various operations.

On the agricultural side, York Timbers owns land with avocados, citrus and macadamia orchards, as well as a fruit packing facility.

Stoltz reports that the Sabie and Jessievale operations contributed a 25% and 4% decrease in Ebitda in the year, respectively, while the plywood and forestry segments contributed positively.

The Ebitda impact of external log purchases in the reporting year, net of harvesting costs, was R239-million.

“We continue to see processing improvements and increases in efficiencies,” Stoltz confirms, highlighting the example of mechanised equipment having been implemented at the group’s harvesting operations in Escarpment.

Clearfell volumes at this operation will nonetheless be low over the next three years, with York Timbers planning to source material from third parties.

Stoltz elaborates that there will be an increase in plywood log availability from 2026 in Escarpment.

He explains that sales volumes in the lumber industry have been declining in the last three years, with many formal sawmills having closed down owing to profitability concerns.

York Timbers’ Sabie sawmill in particular has suffered from cost of production pressures and negative margins; however, a 15% intake has allowed for improvements at the plant.

In turn, the company’s Jessievale sawmill has been impacted on by loadshedding over the last few years, as well as increased margin pressure.

York Timbers’ plywood segment has performed well, having reported 2% intake growth and 4% production growth in the reporting year.

The group obtained certification to export plywood into Australia and New Zealand, which will bode well for the company in the new financial year. The company is certified for export into the European Union and the UK already.

Moreover, York Timbers’ forestry segment reported an increase in thinning volumes at just under 200 000 m³, compared with 160 120 m³ in the prior financial year, reflecting improvements in new machinery used.

The company is planning to undertake more mechanisation and modernisation in its forestry segment.

In the agriculture segment, York Timbers managed to harvest, for the first time, 38 ha of soft citrus after year-end, with 98 ha already having been established. The group’s soft citrus will be in full production yield from 2031.

FINANCE MATTERS

The group successfully refinanced its debt with the Landbank and Absa Capital with a R350-million facility from the Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden.

York Timbers remained compliant with all its covenants in the 2024 financial year and expects to be compliant into the new financial year. The company’s working capital facilities with Absa were renewed after year-end and both asset-backed financing facilities with Absa and Daimler remain in place.

The group’s strategy to increase the rotation period of its plantations constrained liquidity in the reporting period, with the company having spent R283-million on external log purchases.

York Timbers has the flexibility to harvest its own plantations instead of procuring logs externally to improve liquidity.

The directors believe the group has adequate financial resources to continue in operation for the foreseeable future, as well as that the company is in a sound financial position with sufficient borrowing facilities to meet its foreseeable cash requirements.

The directors have satisfied themselves that the group is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements.