York sets out capital raise plan

• Group sets out its plans to use the extra capital to fuel growth strategy, shore up timber volumes and invest in manufacturing plants

Lumber and agriculture company York Timbers this week outlined its plan to approach shareholders for cash in a bid to shore up its timber volumes and invest in its manufacturing plants. The Mpumalanga-based company, which has been hard hit by excessive rainfall and industrial action over the past financial year, intends to raise R250m.

Lumber and agriculture company York Timbers this week outlined its plan to approach shareholders for cash in a bid to shore up its timber volumes and invest in its manufacturing plants.

The Mpumalanga-based company, which has been hit hard by excessive rainfall and industrial action over the past financial year, intends to raise R250m, of which a minimum of R111m and up to about R160m will be underwritten by A2 Investment.

More than 76% of shareholders voted for the special resolution for York to issue shares at the November AGM.

The company’s share price dipped 1.29% to R2.30 on Wednesday as it announced that it had received formal approval from the JSE, giving it the green light to hold the rights issue from December 19.

York said the proceeds would be used to modernise its plants and preserve timber volumes by procuring more externally. It would also enable the company to increase the age at which trees are harvested, from 20 to 23 years on York’s escarpment plantations, which is its key strategic asset.

The company said this was expected to enhance shareholder returns in the medium to long term as it would increase sustainable annual clear-fell volumes in the escarpment by about 85,000m³ a year.

Clear-fell is a logging practice in which most or all trees in an area are uniformly cut down.

“It is clear that the current clear-felling age is suboptimal and not delivering appropriate shareholder returns,” said the group.

“While such a change will require substantial investment, York is better positioned to reassess its clear-felling approach given its reduced debt levels compared to previous years.”

Competing with companies such as Sappi, Nampak and Transpaco for market share, the 106-year-old group has been working to reduce its debt, slashing its R515m debt pile by R133m to R381m by the end of June.

However, cash flow from operations had more than halved in the year to R202m.

Operating through its four segments; processing plants, forestry and fleet, wholesale, and agricultural, York harvests lumber from its plantations, while also buying from other growers, which are processed at its sawmills and plywood plant.

York’s finished products, lumber and plywood, are distributed to its customers, which include truss plants, corporate and independent retailers, remanufacturers, furniture manufacturers and construction contractors.

The group said the planned fundraising injection would also provide it with capital to finalise outstanding maintenance issues and replace critical or outdated components and machinery.

“Existing manufacturing plants are currently not performing at the acceptable availability and efficiency rates and the throughput capacity of the plants is not consistent,” York said.

The situation was compounded by excessive rain during the year affecting harvesting, log transport and production of lumber and plywood, it said.

The National Union of Metal Workers of SA (Numsa) strike from April 25 to June — which was marked by violence, arson, malicious damage to property, intimidation and assault on employees — resulted in the dismissal of some workers and the subsequent termination of the recognition agreement with the trade union.

The R762m group said that the cash raised from the issue would also increase its working capital and liquidity to ensure sufficient headroom for the implementation of its growth strategy.

York, which remains dependent on the SA Forestry Company (Safcol) for some of the log supply to its processing sites, has decried the lack of log security from the SOE, which it says is underpinned by a defective bidding process for logs.

The group, which also has interests in fruit and nut production and packaging, said the uncertainty forced it to mothball the Driekop sawmill, with substantial 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 SA processing facilities.”

York’s top shareholders include the Industrial Development Corporation, Old Mutual and Cape Town-based A2 Investment Partners.

York’s share price has fallen about 39% since the beginning of the year, but it has risen more than 50% over the past three years.