24 March 2005

South Africa: Yorkcor Doubles Profit As Timber Demand Shoots Up

Johannesburg — FOREST products group Yorkcor has posted a seven-fold increase in headline earnings as demand for sawn timber grew 25% for the year ended December 31 last year.

"Not for a decade have sawmillers had it so good," Yorkcor chairman Solly Tucker said about the results.

He said demand for products such as furniture, doors and other timber products was stronger last year than in 2003 because of low interest rates.

Headline earnings a share increased from 11,6c to 82,9c, after-tax profit doubled from R5,5m to R11,1m and the company has R48,7m in the bank.

Tucker said the company had eliminated gearing in its balance sheet.

In the previous period, it had a gearing of 7,7%.

Yorkcor shareholders will get a special dividend of 125c a share, in addition to a 25c dividend. "The special dividend will serve to enhance capital efficiency in the financial structure of the group." Tucker said the group had "powder enough" to pursue its strategic plan which includes acquisitions and concluding a black economic empowerment deal.

The group is aiming to buy a forestry asset in Mpumalanga as it seeks to secure its own log supply lines.

"Certain complications have stood in the way of an early outcome," Tucker said.

He said black economic empowerment groups would play an important role in the new acquisition.

Yorkcor has objected to the choice of Bonheur as the preferred bidder for Komatiland, a subsidiary of state-owned Safcol. Komatiland has 116000 hectares of timberland.

Tucker said the merger would lessen competition as it would give Bonheur 80% control of the raw materials market and close to 40% of the processing market.

"If the merger were sanctioned, there would virtually be no market challenger on the growing side or the processing side. The second-biggest group will only be about a third of the size of the market leader."

The Competition Commission has blocked the sale and Bonheur has taken the matter on appeal to the Competition Tribunal.

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