Lumber and agriculture company York Timbers reported a year-on-year decrease in several key metrics in its year-end financial results for the year ended June 30.

“The financial results for the year have been quite disappointing, especially considering the momentum that was built in the previous year,” York Timbers CEO Gerhard Stoltz said during a presentation of the company’s results, in Johannesburg, on September 21.

The company reported a 5% decrease in gross revenue for the year, from about R1.9-billion in 2021 to about R1.8-billion in the year under review, while earnings before interest, taxes, depreciation and amortisation decreased to R218-million, from R322-million in 2021.

The company’s gross profit dropped by 16% year-on-year to about R492-million.

Cash flow from operations was down 52% to R202-million, while core earnings a share dropped by 38% year-on-year.

Stoltz pointed to excessive rainfall during the period as one of the reasons for the “disappointing” performance, saying it impacted on harvesting, log transport and the production of lumber and plywood.

Additionally, a National Union of Metalworkers of South Africa (Numsa) strike at the company’s escarpment operations from April 25 through to June was typified by intimidation, arson, blocking access and assault, the company said.

In response to the strike, the recognition agreement with Numsa was terminated. Additionally, any employees found guilty of misconduct during the strike were dismissed. About 650 employees were dismissed as a result of the strikes.

However, despite the unrest, York was well-supported by the community, religious leaders and local business leaders during the strike, Stoltz said.

After the strike, focus was centred on ensuring that new employees were recruited from the local communities. 

“This was to ensure the communities in which York operates are supported. It is the right thing to do,” Stoltz said.

Moreover, employee workplace forums were established so that the company would be the first point of communication or contact by employees when addressing employee and business needs.

On the positive side, York Timbers managed to reduce its total debt by 26% year-on-year, from R515-million to R381-million.

Moreover, the company established the highest number of hectares and reduced the quantity of unplanted hectares by the largest margin since 2007, which Stoltz said was a significant achievement.

“York’s plantations are its key asset. While significant log volumes are still required from external sources until our plantations return to a normal rotation cycle, this key asset will be carefully managed to deliver the optimal mix of cash flows and returns,” he said.

He said, however, that, while management was currently performing a strategic review, it was clear that the current clearfelling age was suboptimal and not delivering appropriate returns. 

“While such a change will require substantial investment, York is better positioned to reassess its clearfelling approach given its reduced debt levels. While some patience will be required, we believe the increase in harvesting age will significantly improve returns in future,” Stoltz said.

He explained that York would remain dependent on the South African Forestry Company Limited (Safcol) for log supply to its processing sites. Following the 2022/23 bid award, about 64% of the required bid volume was allocated to York, he noted.

Given the violent industrial action, coupled with the lack of log security for all of York’s operations, Stoltz said the company was forced to make the difficult decision to mothball the Driekop sawmill, which resulted in 420 job losses. 

“We remain of the view that Safcol’s bidding process is flawed as it allows logs to be exported to eSwatini instead of allocating the required volumes to South African processing facilities. York continues to engage with Safcol to secure logs for its operations to remain sustainable and provide job security to its employees,” he said.

In terms of the company’s agricultural business segment, Stoltz said the company was eagerly looking forward to a recovery in fruit and nut prices, following the steep decline experienced in the wake of Russia’s invasion of Ukraine. He said a reduction in supply chain and logistics costs was also expected.

“An additional 60 ha of soft citrus will be established in the new financial year, with the first small crop – a year earlier than forecast – expected from the first citrus plantings. The citrus varieties planted can accommodate the additional cold treatment required by the recently promulgated European Union regulations, albeit at a higher cost,” he said.

He commented that the current global and local economic environment was contributing to the prospect of high inflation, which forced York to remain focused on improving operational efficiencies and diversifying its product offering.

“York is also focused on developing export markets for its lumber and plywood, and thereby diversifying its earnings base away from a changed domestic economy,” he said.