York Timber Holdings Limited · JSE:YRK
York Timber — FY2017 Earnings Presentation
47 slides from York Timber's earnings presentation, Jun 30, 2017
Slide 1: York Results Presentation for the year ended 30 June 2017
2 0 1 7 Y O R K RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2017
Slide 2: Who We Are
WHO WE ARE 2 28,89% York Timber Holdings Limited (York, York Timbers or 28,73% the Company) is listed on the JSE in the Forestry and Paper Index Sector under the share code YRK. York 18,00% was incorporated in 1916 and was first listed in 1946. 13,88% York is an integrated forestry company, operatin
Slide 3: Operational Footprint
OPERATIONAL FOOTPRINT 3 York has extensive forests – 55 589ha planted with pine, 2 047ha with eucalyptus and 2 834ha is temporarily unplanted – providing raw material to its processing facilities. This is supplemented from external resources. The distribution network can reach the entire Southern Af
Slide 4: 2017 Highlights
2017 HIGHLIGHTS 4 NATURAL MANUFACTURED CAPITAL CAPITAL YORK Biological assets Plant availability increased in value by 21% to R2 828 million at 85% (2016: R2 334 million) FINANCIAL CAPITAL 32 different 60 470 plywood products introduced planted hectares of Forest Stewardship Council Revenue certifie
Slide 5: 2017 Highlights
2017 HIGHLIGHTS 5 INTELLECTUAL HUMAN CAPITAL CAPITAL TIMBERS BBBEE level 4 maintained with introduction of 124 training Forestry Code events SOCIAL Winner CAPITAL 2 562 individuals of Chartered Secretaries Southern Africa Integrated Reporting Awards 2016 trained in the Fledgling/Alt-X category for t
Slide 6: Mapping York's Business
MAPPING YORK’S BUSINESS 6 FOREST RESIDUE BY PRODUCT Biomass Remanufacturing Wholesale Retail 1 2 3 4A 4B 5 Truss Nursery Forests External log Processing Biomass/ Warehouse and Customer base plants The nursery York’s sustainable purchases facilities Co-generation distribution Customers are Corporate
Slide 7: Financial Overview
FINANCIAL OVERVIEW aA YORK TIMBERS
Slide 8: Financial Highlights
FINANCIAL HIGHLIGHTS 8 Building a sustainable company requires consistent performance and cash generation over time Group revenue EBITDA Cash flow from operations (R’000) (R’000) (R’000) 2 000 000 250 000 300 000 200 000 250 000 1 500 000 200 000 150 000 1 000 000 150 000 100 000 100 000 500 000 50
Slide 9: Financial Summary
FINANCIAL SUMMARY 9 Revenue EBITDA per share Biological assets Earnings per share increased by increased by increased in value by increased by 3% to 5% to 21% to 59% to R1 833 78 cents R2 828 116 cents million per share million per share 2016: R1 771million 2016: R2 334million 2016: 73 cents per sha
Slide 10: Seven-Year Financial Review
SEVEN-YEAR FINANCIAL REVIEW 10 YORK HAS GROWN REVENUE BY 11.4% CAGR SINCE 2011 CAGR % Audited % Audited Audited Audited Audited Audited Audited 2011-2017 2017 change 2016 2015 2014 2013 2012 2011 Group revenue R’000 11 1 832 805 3 1 771 049 1 543 149 1 323 976 1 131 994 1 112 843 959 143 Gross profi
Slide 11: Seven-Year Financial Review
SEVEN-YEAR FINANCIAL REVIEW 11 EARNINGS PER SHARE SHOW STRONG GROWTH: 47% CAGR SINCE 2011 CAGR % Audited % Audited Audited Audited Audited Audited Audited 2011-2017 2017 change 2016 2015 2014 2013 2012 2011 Earnings R’000 46 367 286 54 238 212 101 468 50 994 106 864 137 818 38 317 Weighted average n
Slide 12: Key Performance Indicators
KEY PERFORMANCE INDICATORS 12 Target in Capitals Key performance indicators Value 2 years’ time 2017 % change 2016 Natural Value of biological asset R’million 2 594 2 829 21 2 334 Total landholding hectares 93 988 93 988 – 93 988 Total forestry area planted hectares 57 950 57 636 1 57 194 Conservanc
Slide 13: Financial Overview
FINANCIAL OVERVIEW 13 Statement of financial position 2017 % 2016 The biological assets include a once-off as at 30 June 2017 R’000 change R’000 adjustment as a result of an improvement achieved in the plantation rotation age. The higher plantation Assets value reflects the benefits of precision for
Slide 14: Financial Overview
FINANCIAL OVERVIEW 14 Statement of financial position 2017 % 2016 as at 30 June 2017 R’000 change R’000 York continued to repurchase shares, now up Equity and liabilities to 4.6% of the issued shares. The Board believes Equity 2 992 565 14 2 632 573 in the value of the business and will request Shar
Slide 15: Financial Overview
FINANCIAL OVERVIEW 15 The absence of economic growth and lack of Condensed statement of profit or loss and other comprehensive income confidence in the construction sector resulted in for the year ended 30 June 2017 lower sales volumes in most product categories. 2017 % 2016 York’s market share incr
Slide 16: York Log Prices Higher Than Industry: 4th Quarter 2016
YORK LOG PRICES HIGHER THAN INDUSTRY: 16 4TH QUARTER 2016 York Log prices higher than Industry 4th QTR 2016 Industry YTD Industry Qtr Kwazulu -Natal Cape Mpumalanga 3 3 Log Classes % per m higher % per m higher % per m3 higher % per m3 higher % per m3 higher a 16% 16% 7% 47% 15% b1 33% 36% 47% 75% 2
Slide 17: Financial Overview
FINANCIAL OVERVIEW 17 Condensed statement of cash flows for the year ended 30 June 2017 2017 % 2016 R’000 change R’000 Profit before taxation 510 443 53 333 400 Working capital investment increased as the intakes Adjustment for non-cash items, interest (257 159) 144 (105 239) at the processing plant
Slide 18: Top Risks
18 TOP 10 RISKS
Slide 19: The Top Ten Risks
THE TOP TEN RISKS 19 The residual risks facing York are reflected on this heat map: The top ten risks York faces, together with the probability of these events occurring and the impact thereof High 3 6 1 Critical (high, medium and low), are listed Board and here. The mitigating strategies, Executive
Slide 20: Key Risks and Mitigating Strategies
20 High Medium Low Capitals Key risks and description Probability Impact Mitigating strategies and opportunities arising KPIs affected KOMATILAND FORESTS (KLF)* • York continues to engage with KLF for transparent • Sustainability of biological asset MARKETING POLICY pricing and three-year, renewable
Slide 21: Key Risks and Mitigating Strategies
21 High Medium Low Capitals Key risks and description Probability Impact Mitigating strategies and opportunities arising KPIs affected TECHNOLOGY DISADVANTAGE • Upgrading processing technology to the right • Purchase of property, plant and equipment • Ageing processing technology with programmable l
Slide 22: Key Risks and Mitigating Strategies
22 High Medium Low Capitals Key risks and description Probability Impact Mitigating strategies and opportunities arising KPIs affected COMMUNITY • Active engagement with local and provincial • Number of visits to York clinics • York required to fulfil the role of governing bodies on service delivery
Slide 23: Biological Asset Valuation and Wood Properties
23 BIOLOGICAL ASSET VALUATION AND WOOD PROPERTIES
Slide 24: New Pine Regime for York Highveld
NEW PINE REGIME 24 FOR YORK HIGHVELD
Slide 25: New Pine Regime for York Escarpment
NEW PINE REGIME 25 FOR YORK ESCARPMENT New regimes - Site quality 1 Product classification in terms of diameter spread per log class Dbh Q BA Vol MAI Utilisable Age yr Operation Tph nr Height m cm m2/ha m3/ha m3/ha/yr Vol % Total m3 Pulp H-class A-class B-class C-class D-class 6 1 200 15 15 22 152 2
Slide 26: New Pine Regime for York Escarpment
NEW PINE REGIME 26 FOR YORK ESCARPMENT New regimes - Site quality 4 Product classification in terms of diameter spread per log class Dbh Q BA Vol MAI Utilisable Age yr Operation Tph nr Height m cm m2/ha m3/ha m3/ha/yr Vol % Total m3 Pulp H-class A-class B-class C-class D-class 6 1 200 6 12 14 38 6 8
Slide 27: Genetic Fingerprinting
27 Genetic fingerprinting: this involves extracting DNA from tissue samples of trees and generating a genetic profile, or fingerprint, for the particular individual
Slide 28: Precision Forestry
PRECISION FORESTRY 28 Phenotype Genotype [OUTSIDE] [INSIDE] P = G+E+GxE Genome diversity atlas Landscape genomics
Slide 29: Growth Site / Specie Matching / Wood Properties / Market
GROWTH SITE / SPECIE MATCHING / WOOD PROPERTIES / MARKET 29 Applying site-specific management and silviculture that will give increased fibre yield (volume) and fibre quality (wood properties) THERE MAY BE BUT IS THERE A MATCH CHEMISTRY …? Suited Wood properties involve site-specie understanding the
Slide 30: Applying Site Specie Matching Gives Optimal Yield Curve
APPLYING SITE SPECIE MATCHING GIVES OPTIMAL YIELD CURVE 30 Response ratios of the most important commercial pine species to MAT 1,3 Response ratio 1,2 1,1 Average 1,0 0,9 0,8 0,7 0,6 0,5 12 12,5 13 13,5 14 14,5 15 15,5 16 16,5 17 17,5 18 18,5 19 19,5 20 MAT (°C) P. pat PxT_H PxT_L PxO P. tae P. ell
Slide 31: Tree Physiology
TREE PHYSIOLOGY 31 Cross-sectional profile of a tree with distinctive anatomical portions Annular rings Springwood Outer bark Juvenile wood Pith Inner bark Rays Cambium Heartwood Sapwood Summerwood
Slide 32: MFA Thresholds of Pine Wood Properties
MFA THRESHOLDS OF PINE WOOD PROPERTIES 32 Using the face of a watch for comparison, we aim to keep the MFAs of wood grown as close to the 6 and 12 hour hand as possible or less than 45° and as close as possible
Slide 33: Wood Stiffness
WOOD STIFFNESS 33 JUVENILE WOOD VS MATURE WOOD GROWTH GROWTH MICROFIBRIL ANGLE (MFA) 10° to 40 ° change in MFA can impact timber stiffness by up to six times • First 8 to 12 years of • After 8 to 12 years of growth growth • Low density • High density • High MFA • Low MFA • Low cell uniformity • High
Slide 34: Investment Case
34 INVESTMENT CASE
Slide 35: Investment Case
INVESTMENT CASE 35 P/E ratio; EBITDA and EPS vs share price 120 115 400 cents THE CURRENT SHARE PRICE 390 DOES NOT REFLECT THE 100 UNDERLYING PERFORMANCE 360 OF THE BUSINESS 360 360 360 80 78 York’s share price (R2,60) was trading at a 74 74% discount to the underlying tangible net 73 asset value (R
Slide 36: Future Outlook
FUTURE OUTLOOK 36 York’s summarised strategy will be focusing on the following nine key areas to improve quality of earnings and diversification of revenue Pillar 1 Pillar 2 Pillar 3 Pillar 4 Pillar 5 Pillar 6 Pillar 7 Pillar 8 Pillar 9 Three year Remanu- Property forecast Lumber Plywood Forestry fa
Slide 37: Merger: York/GRAS
MERGER: YORK/GRAS aA YORK TIMBERS
Slide 38: Creating the Largest Pan-African Integrated Forestry Player
CREATING THE LARGEST PAN-AFRICAN 38 INTEGRATED FORESTRY PLAYER Background Rationale York and Green Resources AS Larger consolidated planted area Significant commercial land available for planting (“Green”) are engaged in 2% 16% 82% negotiations on a potential 2 834 16% 15 534 19 788 combination of a
Slide 39: Green Resources and York Land Areas
Asia & India Shipping advantage 39 Green Resources: Uganda Hectares Title deed 9 950 Commercial: planted 6 725 Non-commercial 3 225 Remaining commercial area - Green Resources: Tanzania Hectares Title deed 71 038 Commercial: planted 22 227 Non-commercial 29 022 Remaining commercial area 19 788 Green
Slide 40: Developing Operational Capabilities and Unlocking Synergies
DEVELOPING OPERATIONAL CAPABILITIES 40 AND UNLOCKING SYNERGIES Combination synergies Production Marketing and distribution Green is a late development stage • York’s experienced and focused • Developing access to new growth forestry management team could markets for existing York lumber forestry ass
Slide 41: York Integrated with Community
41 YORK INTEGRATED WITH COMMUNITY
Slide 42: The Team Equation: Delivering Success
THE TEAM EQUATION: DELIVERING SUCCESS 42 AUTHENTIC OUTCOMES BASED PARTNERSHIPS Business success linked to community success York Team Social Investment Job creation, talent development THE YORK ADVENTURE CLUB AND EVENTS SUPPLIER DEVELOPMENT Social impact: An outdoor club for employees and community
Slide 43: Timber Promise
43 TIMBER PROMISE Consumers are committing to greater use of timber for housing, furniture, doors, frames, decking and other innovative purposes. Through their willingness and desire to adopt wood for its aesthetic value and wider applications, the industry can respond by delivering on these needs.
Slide 44: Wood Is Unique
WOOD IS UNIQUE 44 Wood is unique and highly beneficial for the production of wood-based products and components for construction purposes. Some of the properties would be almost impossible to replicate in any other building materials. Some of these properties include: • Thermal properties: Wood does
Slide 45: For York Money Does Grow on Trees
45 Electrical properties Variation properties Mechanical properties For York money does grow on trees Aesthetic properties Workable properties Oxidation properties
Slide 46: Disclaimer
DISCLAIMER 46 This presentation contains forward-looking statements about York’s operations and financial conditions. The Company has prepared this presentation based on information available to it at the time of writing, including information derived from public sources. No representation or warran
Slide 47: Thank You
O/] R THANK YOU a\ YORK TIMBERS