South African timber company Yorkcor posted robust financial results for the first half of the year, thanks, in part, to an improvement in the housing and construction sectors.

Chairperson Solly Tucker told journalists yesterday that, whereas ‘show wood’ – used in the making of furniture – used to be the backbone of Yorkcor’s business, demand has now swung to construction-quality wood as a result of the resurgence in the building sector.

“Housing in this country has strong political connotations and pine is a strategic resource. We did well from housing, but trends may change in the future,” Tucker said.

The company posted a 25% rise in headline earnings during the period under review – from 11,9 cents per share for the six months ended June 30, 2002, to 14,9 cents for the same period this year.

Net profit for the six months rose from R1,311-million last year to R2,221-million this year.

The tax provision amounted to R992 000, while revenue is up 26%, from R41,7-million to R52,9-million.

Yorkcor said the quality of group sales and production efficiencies made for a 33% improvement in margins – group gross profit rose from R23,8-million to R31,9-million.

Significantly, the net asset value per share was enhanced by almost 50%, from 358 cents at June 30, 2002, to 526 cents per share at June 30 this year.

Tight cash and asset management brought strength to the group’s balance sheet.

Yorkcor’s gearing amounted to a mere 6% and, despite capital expenditure of R5,4-million invested during the half-year under review, the company boosted its cash balances from R0,27-million to R4,75-million.

In the period under review, Yorkcor sought markets that were hospitable and continued to outperform national performance averages.

Commenting on several legal claims that Yorkcor is involved in, Tucker said the group was cautiously optimistic about all pending matters and has taken appropriate steps to deal with any eventuality.

“Perhaps the most important matter being litigated concerns Yorkcor’s substantial claim for compensation from the government for terminating one of our evergreen contracts.

“The arbitration to determine the amount we should be paid in June 2004 resumes later this month,” Tucker explained.

In December 2001, the Minister of Water Affairs and Forestry gave Yorkcor five years notice of termination of its York Lumber contract over three forests near Bushbuckridge, ostensibly in the public interest.

The declared intention was to convert these timberlands into a conservation area. The government, Tucker said, has conceded that it is liable to pay “reasonable and adequate compensation”.

“The recent fires in Mpumalanga have been devastating. The extent of the damage has yet to be measured, but it has already been declared a disaster area. This foreshadows timber shortages and rising prices,” Tucker predicted.

“Management is losing no time focusing on plans to address the new situation. A windfall for Yorkcor could be emerging – our long-term strategies for secure sources of supply have taken on greater dimensions and redoubled urgency,” he added.