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    UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS for the six months ended 31 December

    2015

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  • York Timber Holdings Limited unaudited condensed consolidated interim financial results

    for the six months ended 31 December 2015

    2 Financial highlights

    COMPANY INFORMATION York Timber Holdings Limited (Incorporated in the Republic of South Africa)

    (Registration number: 1916/004890/06)

    JSE share code: YRK

    ISIN: ZAE000133450

    (“York”, “the Company” or “the Group”)

    Executive directors: Pieter van Zyl (CEO), Pieter van Buuren (CFO) Non-executive directors: Dr Jim Myers* (Non-executive Chairman, USA), Paul Botha, Dr Azar Jammine*, Shakeel Meer, Dinga Mncube*, Maserame Mouyeme*, Thabo Mokgatlha*, Gavin Tipper* (*independent) Registered office: York Corporate Office, 3 Main Road, Sabie, Mpumalanga Postal address: PO Box 1191, Sabie, 1260 Auditors: KPMG Inc. Company Secretary: Sue Hsieh Sponsor: One Capital Transfer secretaries: Computershare Investor Services Proprietary Limited

    www.york.co.za

    Revenue up

    15% mainly due to increased sales volumes

    Operating profit up

    12% due to sales volumes, improved cost optimisation and equipment efficiency

    EBITDA (Earnings before interest, tax, depreciation and amortisation) up

    10%

    Long-term debt increased by

    R253 million due to plywood expansion project

    Cash from operating activities increased by

    R97 million driven by a reduction in working capital

    Earnings per share down

    48% due to lower fair value adjustment on biological asset

    Underlying tangible net asset value per share up

    4% from 728 cents to 759 cents

    Core earnings per share up 24%

    Biological asset value down

    0,6% primarily due to increase in the discount rate

  • York Timber Holdings Limited unaudited condensed consolidated interim financial results

    for the six months ended 31 December 2015

    3Commentary

    Group performance and financial review Revenue up 15% to the comparative period. Lumber volumes increased by 10% and external log sale volumes increased by 9%. Lumber market demand remains resilient, supported by the informal building sector. The gross profit percentage increased by 1% driven by production efficiencies and improvement in average selling prices. Lumber production volumes increased by 3% whilst plywood production volumes decreased by 2% due to construction interruptions as a result of the plywood expansion project. External log prices continued to exceed inflationary increases at a weighted average 15% over the comparative period.

    Core earnings per share increased by 24% (being headline earnings per share excluding the fair value adjustment on biological assets net of tax).

    Selling and administration expenses increased mainly as a result of a once off charge of R11 million incurred for Project Evolve, an efficiency improvement project. The benefits are evident in the Company’s performance.

    Cash from operating activities increased by R97 million as a result of working capital reduction. Market demand for timber products remained strong, resulting in industry stock levels being reduced substantially.

    A fair value adjustment of R5,7 million was made to the June 2015 biological asset value. This was despite an increase in the R186 bond rate over the December period. Consistent focus on forestry best practices resulted in improvements to growth and forecast yields over the life of the biological asset.

    Processing division Capital expenditure at the Driekop and Jessievale sawmills enabled these operations to exceed prior period production levels. The plywood expansion project is on schedule for commissioning in May 2016. Project Evolve has led to an overall equipment efficiency improvement and better cost optimisation at all the mills that created a platform for continuous improvement.

    Forestry division Forestry division delivered 4% more logs to the processing plants than in the comparable

    period from own and external sources. Improved fire prevention measures and response times resulted in no growth stock losses during the reporting period. Abnormal rainfall patterns were experienced during the reporting period that delayed planting. Drought mitigating measures with late rains have improved the number of hectares planted subsequently. York continued to procure external raw material and is confident that sufficient raw material for its processing plants will be secured. External purchases increased by 1% over the comparable period and represented 34% (previous period 35%) of total log volumes delivered. External log purchases totalled ca R118 million and impacted York’s earnings, resulting in an incremental increase of R16,1 million.

    Wholesale division The segment contributed R234,1 million in revenue to the Group, with sales volume of lumber and plywood increasing by 14%. Re-manufacturing expanded its market share and customer base and York is committed to further investment in this division. The EBITDA margin improved from 1,81% to 2,87%.

    Balance sheet movements York has invested R152 million in property, plant and equipment, the bulk of which relates to the plywood expansion project. In the comparative period, a portion of the plywood expansion project was funded from operating cash flows in order to secure production slots for the manufacture of specialised equipment. Drawings on the Land Bank facility have subsequently commenced and a total of R244,3 million has been utilised to date. Improved profitability and cash flow generation allowed for re-negotiation of funding rates with the Land Bank and resulted in a 150 basis point reduction in the cost of debt, with effect from 1 December 2015. All debt covenants continue to be met.

    Working capital investment reduced during the period, mainly as a result of a reduction in inventory. Accounts receivable are managed well and days outstanding improved in the comparative period. Trade payables decreased as a result of slowing activity over the December holiday period.

  • York Timber Holdings Limited unaudited condensed consolidated interim financial results

    for the six months ended 31 December 2015

    4 Commentary continued

    Underlying tangible net asset value Underlying tangible net asset value (TNAV) represents the physical net asset value including property, plant and equipment, biological assets, all other assets excluding intangible items such as goodwill and deferred tax, and less liabilities. This measurement demonstrates the underlying value inherent in the Company on a per share basis.

    TNAV improved by 4% from 728c to 759c. On 31 December 2015, York shares traded at a 71% discount to the TNAV. York re-purchased a further 2 million shares during the period. As of 31 December 2015, total shares re-purchased was 5,7 million shares. Given the substantial discount to the TNAV to which shares in York trade, the continuation of the re-purchase programme is under review.

    Core earnings per share In terms of IAS 41, the biological asset is revalued at each reporting date and any changes in the valuation are reflected in the income statement. The biological asset is long term in nature and the valuation assumes its realisation over a 25-year period from the date of the valuation. While the manner in which the asset is managed in the short term will impact on its long-term value, in order to provide financial statement users with an additional measure of the current period’s results, “core” earnings per share have been presented. “Core” earnings comprise headline earnings adjusted for the change in the value of the biological asset as reflected in the income statement.

    Cash flow Cash generated from operations improved to R121,2 million from R26,5 million in the comparable period. York invested R150,2 million (previous period R86,9 million) in property, plant and equipment. Continuing normal debt service obligations, coupled with the inflow of financing for the plywood expansion project, resulted in a net increase in loans and borrowings of R76,9 million (previous period R6,8 million).

    Cash on hand at reporting date is R205,2 million, an improvement of 508% on the comparable period.

    Outlook The plywood expansion project is scheduled to be commissioned in May 2016. Production capacity will increase by 67%. The expected pay-back period of the project is three to four years. The significant depreciation of the South African Rand has led to a review of York’s currency profile and export opportunities are being pursued.

    York submitted a bid for a power plant as part of the Renewable Energy Independent Power Producer Procurement Programme. The announcement of preferred bidders is expected towards the end of March 2016. This project will enable York to unlock further value from its plantations and diversify its earnings base.

    York received a record of decision for decommissioning of the Mount Anderson waste dump site.

    The abovementioned projects and approval are part of the Sabie integrated site.

    The Forestry division developed new operating regimes with the introduction of hybrid Pinus species and the optimal utilisation of York’s growth sites. This will positively impact yield per hectare and wood propert

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