York Timber, SA’s largest solid wood processor, raked in a record operating profit in its year to end-June but has appealed to shareholders to remain patient over payouts, saying that holding on to its land and what it is growing there is still in their best interest.
The group, valued at R1.2bn on the JSE, has not paid a dividend in a decade and its shares were trading at a hefty 80% discount to net asset value (NAV) by its year end, when robust local and international demand for plywood helped bring in a record R326m in core profit, from R12m previously.
York, with large plantations across Mpumalanga, lost its CEO, Piet van Zyl, to Covid-19 in July and has caught the attention of activist shareholders. Since July, the group has seen a shake-up in its shareholder base, with A2 Investment Partners building up a 20% stake, prompting an ultimately successful demand for two nonexecutive seats on the board.
Incorporated in 1916, York has been listed on the JSE since 1946. Its share had generally languished since 2009, before some interesting activity this year. It is one of SA’s oldest companies and owns plantations and processing plants, selling timber and plywood products such as doors and frames. It is, however, currently reliant mostly on externally sourced logs as it waits for its timber plantations to reach maturity.
At its investor presentation on Tuesday, York fielded numerous questions about why it did not consider selling off some of its land holdings to unlock value, even as it opts to branch out into agriculture. The group also opted not to pay a dividend, despite trimming debt by R69m to R444m.
Interim CEO Gerald Stoltz said shareholders needed to consider the group’s historical debt profile and the need for its timber plantations to mature. Agriculture makes better use of some of its land, rather than just selling it at forestry prices, he said, while also diversifying the group’s revenue.
“I understand that it is frustrating to wait, but that is unfortunately the asset class that we have, so you cannot rush it,” he said.
During the year, the group spent R77.5m on new sawmilling and pallet-making businesses, avocado and macadamia farms, and a fruit-packing facility. The group also established about 40ha of soft citrus, with its new agriculture segment delivering a small operating profit of R4m.
Stoltz said the soil and climate of the land in question was perfect for farming, but the group had lacked the necessary water rights, which became available only after it bought two adjacent properties.
“We did not buy those businesses from the previous owners because they failed at what they were doing. These were successful businesses that we acquired,” he said.
“We definitely believe that returns that shareholders will get out of this development will be very beneficial, and optimal for the use of that land,” said Stoltz.
Small Talk Daily’s Anthony Clark said York’s interim CEO had been “sincere and transparent” and the company had significant potential to the upside.
“Clearly, management have woken up to the fact that shareholders are a little bit more discerning and demanding than they have been in the past decade when they ran that company as a fiefdom,” he said.
Revenue for the year rose 29% to R1.85bn, with the group benefiting from a record operating profit in its plywood division, amid robust demand from a home-improvement boom, fuelled by an increase in the number of people working and studying from home.
York’s shares ended 2.79% weaker at R3.50 on Tuesday but have risen almost 90% in the past three months.
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