Multinational manufacturer of furniture and household goods Steinhoff International Holdings said yesterday it was planning a large-scale investment programme for the southern and eastern Cape, as part of a new business model that is set to improve margins and efficiencies.

South African-based Steinhoff, led by CEO Markus Jooste, said it expects to create some 2 000 new jobs in the region, with the completion of the new model in about two years.

As part of the project, the company is currently building a sawmill near George, which is expected to begin production in April, when the wet mill is up and running.

Managing director of South African operations Danie van der Merwe explained that the R100-million facility would be completed in September and would ramp up to full production in January, 2005.

A further R100-million will be invested in the group’s plantations.

At full production, the sawmill will process some 150 000 m3 of timber per shift, sourcing material from the group’s Thesen plantations, in the Knysna area. Raw material is also to be sourced from Safcol. The mill’s capacity, said van der Merwe, could be double over time.

“This is part of our strategy to supply our own operations, as well as utilise the whole tree for production,” he told Engineering News Online, adding that the new mill would create about 150–200 new jobs.

The mill will also increase Steinhoff’s recovery of timber by between 10% and 15%, enabling it to supply to the structural, furniture and DIY markets. The remaining raw material will be used by chipboard producer PG Bison Holdings, of which Steinhoff recently acquired the remaining 65,01% issued shares. The transaction is awaiting regulatory approval from South Africa’s Competition Commission.

Steinhoff currently owns and operates three other mills and leases one sawmilling facility near Mossel Bay.

“Our new mill will be far more efficient than any of the others that we currently run,” said van der Merwe.

He explained that part of the new business model would also be to construct factories near the group’s sawmills, reducing transportation time and costs – a strategy that has given Brazilian timber and furniture companies the edge over their competitors.

The new business model is in line with the group’s bid to increase its exports from Southern Africa, benefit from economies of scale and better utilise production capacities and improved efficiencies, in a strengthening rand environment.

Steinhoff yesterday also reported solid results for the six months ending December 31, 2003, reflecting the expansion of its operations, especially in Europe and Australasia.

Steinhoff is an integrated global lifestyle supplier focused on manufacturing, wholesaling and distribution of furniture and household goods, with interests in Southern Africa, the European Community, Eastern Europe, Australia and New Zealand.

“We are extremely pleased with the group’s results. Steinhoff is an international player with some of the world’s best furniture-manufacturing assets and the sustainability of our strategy is proved by the continued increase in both volumes and margins,” said Jooste.

Including exports from Southern Africa, the group generated 81% of its revenues in foreign currency, with only 19% of revenues derived in rands.

Revenue increased by 22%, to €657-million, and headline earnings increased by 30%, to €64-million. The average group operating margin improved to 11,1%.

In rands, revenue increased by 2%, to R5,4-billion, and headline earnings increased by 8%, to R528,7-million.