“The reporting period was characterised by strong price competition that required York to react in order to protect its market share,” the company said in a statement.
“Sales volumes increased but average selling prices were below prior year levels resulting in a decrease in margins but an increased cash flow generation.”
Revenue for the company was up 14 per cent to 671.9 million rand for the six months ended 31 December 2013. This was from 590.7 million rand in the previous comparative period.
(WATCH VIDEO: York Timber 2013 FY earnings down 21%)
[DATA YRK:York Timber] is a South African saw and log milling company that specialises in producing lumber products such as structural timber, wood laminates and furniture.
The significant increase was due to the company’s acquisition of the Roodekop and Epping businesses, that added remanufacturing and distribution capabilities.
“The acquisition of the Roodekop and Epping businesses became effective on 1 August 2013. A restructuring of these businesses was carried out and will be completed by the financial year end. These businesses provided the Group with a new revenue stream, an improved market penetration and the ability to improve customer service levels.”
Earnings before interest, taxes, depreciation and amortisation were however down by 33 per cent due to reduced average selling prices, and operating profit followed suit, with a decrease from 66.7 million rand in 2012 to 37.9 million rand for the period under review.
Gross profit was recorded at 203.4 million rand from 211 million rand in 2012, and net cash from operating activities up 7.1 million rand to 51.2 million rand from 44 million rand in 2012.
“Lumber demand has increased on a rolling twelve month basis by 2 per and is expected to increase in line with the GDP growth rate,” York Timber explained.
“The higher repo rate negatively impacted the building and construction sector. York’s pricing strategy is to at least obtain inflationary rate increases for lumber.”
Total revenue for the company’s timber products divison increased to 651 million rand from 568 million rand in 2012, and while production volumes in the segment increased, average selling prices for lumber were 1.8 per cent lower than the comparative period.
York Timber’s total revenue for its forestry division increased to 305.7 million rand from 287.8 million rand, benefitting from higher log intake at the processing plants.
The increase in the minimum wage rate also resulted in increased contractor costs, contributing to a 14 per cent increase in forestry operating costs over the comparable period.
Total revenue from both divisions was recorded at 956.7 million rand from 855.8 million rand in 2012.
“In order to increase York’s global competitiveness and mitigate rising cost pressures, York will continue with its stated strategic intent to develop the Sabie integrated site [in Mpumalanga],” said York Timber.