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Forest owner and wood processer York Timber said on Thursday profits fell almost a third in its half-year to end-December, hit by some higher costs, including from load shedding and from its externally sourced logs.
Revenue fell 7% to R902 million to end-December while profit fell about 30% to roughly R41 million, with the company hit by a rise in log prices, as well as significantly higher diesel costs.
York Timber is one of the JSE's oldest companies, having listed in 1946, and it has about a R1 billion market value. The company owns forests in Mpumalanga but has recently revised its strategy to allow trees to mature longer, making them more valuable, and it gets more than intake externally. Log prices had risen 11%, the group said, even as the price of lumber fell 3%.
The company said on Thursday its forestry division has challenged by the implementation of the revised clearfell strategy.
"The team is focused on improving our forestry execution and a revised planting and harvesting program. In the Highveld, where our plantations are in rotation, harvesting has been suboptimal, which is being addressed, through the investment in new equipment and revised operational practices."
On a production unit cost basis, the delivery cost for final products increased by 36%, the log delivery cost increased by 38%, and vehicle operational costs and diesel burnt during electricity load shedding increased by 44%, it said.
In December, the company had concluded a R250 million rights issue, and its net debt fell by R96 million to R395 million.
The company said on Thursday the South African Forestry Company was also proposing log price increases of 8% for 2023/24, which would be "unaffordable in the current environment, and we continue to engage with SAFCOL on finding solutions."
"Log price increases from (SAFCOL), in a trading environment where lumber industry prices continue to decline, places its customers' sustainability at risk," it said.
Selling prices and demand are expected to remain depressed in a high inflation and interest rate environment where consumers’ spending is focused on mitigating electricity load shedding and water supply as opposed to building and renovations, said York.
"In order to mitigate the continued increases in production costs from diesel and electricity load shedding, focus is on increasing plant efficiencies and throughput," it said.
Click here for details on York Timber's shares as well as other info.
Shares in York Timber rose 5% to R2.10 on Thursday and have fallen by just over a quarter over the past year.
