Publications
Partners
- York Timbers, one of the oldest companies on the JSE, crashed to a loss in 2023, hit by writedowns to its trees and cost pressure.
- The company has also decided to pursue a strategy of allowing its trees to grow longer, which makes them more valuable.
- One analyst said given this change in strategy, poor results were to be expected.
- For more financial news, go to the News24 Business front page.
York Timbers, one of the oldest companies on the JSE, said on Friday it swung into a loss in its year to end-June, hit by a writedown to its forests and orchards that is more than twice its market value.
The group, valued at about R770 million on the local bourse, reported a loss of R313 million in its year to end-June, from profit of R184 million previously, hit by an increase in costs related to load shedding, downward pressure on sales, and the cost of external log purchases after it changed its cutting strategy.
York said a decrease in SA building plans and lower market sentiment was causing severe pressure, saying in a presentation that industry stock continues to increase and was 28% higher than June 2022.
The value of its biological assets was written down by R384 million, or by 12% to a total of R2.5 billion.
The forest owner and solid-wood processor was established in 1916 and listed on the bourse since 1946. It owns plantations in Mpumalanga where it grows pine and eucalyptus trees, also owning sawmills and a plywood plant.
York also has land with avocados, citrus and macadamia orchards, as well as a fruit-packing facility.
The group has also come under pressure from a change in its strategy, having increased the time trees will be harvested, from 18 to as much as 23 years, which increases their value, but this has meant it is also more dependent on external log purchases.
The group said the incremental cost of not harvesting its own trees early was R209 million, but added there would be "short-term pain for medium and long-term sustainable returns".
York said on Friday it had also breached some loan covenants with Absa, though the lender has waived calling a default. This includes its interest rate cover ratio - a measure of interest payments compared to earnings, or the ability to repay debt - which was at 2.2 times in 2023, compared to a requirement of being higher than 3.5 times.
Total borrowings including lease liabilities, however, fell about 6% to R424 million to end-June. Borrowings have steadily fallen from more than R900 million in 2017.
Small Talk Daily's Anthony Clark said on Friday that given the decision to maximise the value of the trees to allow them to grow, the results were to be expected, and any investor which decided to stick with the company would need to be patient.
"We are seeing the first year of that, there's at least another 18 months of very weak results ahead with very constrained cash flows and tight operating conditions until these trees actually reach a size that enables them to be sold at a far more effective level."
"Yet the net asset value is potentially juicy, but in order to unlock that value it's probably going to take two or three years."
Shareholders would need to consider the strain of the balance sheet, and the time, said Clark, but he added that A2 Investment partners has previously delivered value at companies including Novus and Nampak.
Clark added, however, that the focus appears to be on Nampak with York on the "back burner" at the moment.
Activist shareholder grouping A2 Investment Partners and Legae Peresec have built up a combined stake of more than 31% of the company, with York getting two new board members as a result.
Clark also criticised York's presentation, described it as similar to that made on a "1970s version of PowerPoint".
"It was the most retro presentation I've seen in a long, long time, and totally unbefitting of a company in 2023. It looks like it was a slap-dash attempt to get a presentation through."
Shares in York Timbers were down almost 2% in afternoon trade on Friday and have fallen more than 30% in the past year.
