York Timber Holdings Limited Investor Presentation 30 June 2014 - PowerPoint PPT Presentation

York Timber Holdings Limited Investor Presentation 30 June 2014 Results York Timber Holdings Limited

Comparative Financial Results R'000 Audited % Audited % Audited % Audited 2014 Change 2013 Change 2012 Change 2011 Group Revenue 1 323 976 17% 1 131 994 2% 1 112 843 16% 959 143 Gross Profit 431 958 5% 410 298 -3% 421 519 0% 420 912 Gross Profit Margin 33% -10% 36% -4% 38% -14% 44% Operating Profit 116 811 -28% 161 365 -3% 166 068 3% 161 897 Operating Margin 9% -38% 14% -4% 15% -12% 17% Net Cash Finance Costs 56 440 3% 54 672 -33% 81 353 -19% 100 370 Cash Flow From Operations 151 461 42% 106 486 -46% 197 087 5% 187 239 Biological Assets 2 103 092 0% 2 100 870 1% 2 070 222 7% 1 936 398 Interest Bearing Borrowings 562 616 -6% 597 173 7% 558 400 -9% 614 225 Net Working Capital 213 182 18% 180 446 51% 119 372 5% 113 460 Earnings 49 757 -53% 106 864 -22% 137 818 260% 38 317 Earnings Per Share (cents) 15 -54% 32 -22% 42 247% 12 TNAV Per Share (cents) 706 3% 688 5% 655 7% 612  Revenue Compounded Annual Growth Rate (CAGR) 8.4%  Significant improvement of 42% in cash flow from operations when compared to the prior year  Biological asset growth CAGR of 2.1% York Timber Holdings Limited 2

Financial Year 2014: Explanation of Cost and Margin Movement Cost Movement Explained Cost escalation of 24% Total cost (Revenue - Operating margin) 1 207 165 related to acquisition of Cost movement 2013 to 2014 236 536 wholesale division Reconcilliation 24% Cost optimisation External log purchase movement 35 781 delivering benefits Fixed cost contribution from Roodekop & Epping 63 549 Gross profit margins Increased cost of sale due to merchandising trading 151 017 decline by 3% but, Other -13 812 York old GP intact when compared to 236 536 prior year Margin Movement Explained Operating margin 2013 Financial Year 2014 declined by 5% Roodekop & Abruptness of wage Margin Explained Prior Year Combined York old increases, internal Epping transport and utilities Revenue 1 131 994 1 323 976 1 158 628 165 348 and purchase of external logs impacted Cost of sales 64% 67% 64% 91% cost base GP% 36% 33% 36% 9% Operating Margin % 14% 9% 11% -7% York Timber Holdings Limited 3

EBITDA Reconciliation From 2013 to 2014 : R’000 Prices on lumber increased by 2.8% (less R250 000 than CPI) R22 806 R187 153 Purchased 23.3% more R200 000 logs from external parties R156 262 to preserve own plantations as maturity R150 000 age not at optimal level Reduction in other R100 000 income relate to environmental provision released – prior year R50 000 R27.6 m vs. current year R7.2 m R0 Forestry division performed well during the -R17 916 year, driven by high (R50 000) -R35 781 eucalyptus prices and 2013 Net Revenue External Log Increased 2014 above inflation increases Growth purchases expenses & for pine reduced other income York Timber Holdings Limited 4

Balance Sheet Growth in TNAV continued Net Working Capital R4 000 000 800 increased by R33 million 700 due to wholesale business R3 000 000 acquisition 600 R2 000 000 Goodwill tested and 500 remains in tact against Cents R1 000 000 400 biological asset value which increased marginally 300 R0 year on year 200 2009 2010 2011 2012 2013 2014 Biological asset (R1 000 000) 100 maintaining consistent level despite increase in (R2 000 000) 0 discount rate and reduced Biological asset Property, plant and equipment price assumptions Goodwill Cash Interest-bearing Interest bearing borrowings Deferred tax borrowings reduced with Provisions and other Net working capital loan increase to purchase NAV per share (cents) wholesale business York Timber Holdings Limited 5

Cash Flow Cash generation remains strong Cash balance reduced 200 000 180 000 R48.2 million driven by increased property, 160 000 150 000 plant and equipment 140 000 investment of R66.1 100 000 million 120 000 Cash on hand 50 000 Cash flow from 100 000 operating activities Balances - improved by 42% year 80 000 30-Jun-10 30-Jun-11 30-Jun-12 30-Jun-13 30-Jun-14 on year driven by -50 000 higher volume sales 60 000 from acquisition of -100 000 wholesale business 40 000 Financing activities in -150 000 20 000 the year include funding obtained for -200 000 - wholesale business Net cash from operating activities Net cash applied to investing activities acquisition Net cash applied to financing activities Total cash at end of year York Timber Holdings Limited 6

Market Dynamics and Demand Growth of lumber sales 1 800m³ 10% York market share for 9% 1 600m³ lumber at similar Sales in thousand m³ 8% 1 400m³ levels, whilst plywood 7% 1 200m³ 6% market share is 1 000m³ 5% 800m³ declining 4% 600m³ 3% 400m³ 2% Lumber sales grew by 200m³ 1% 4.7% CAGR from 2009 0m³ 0% 2009 2010 2011 2012 2013 2014 Thousand m³ sold 1 301m³ 1 413m³ 1 525m³ 1 533m³ 1 567m³ 1 633m³ Plywood sales grew by Year on year growth 9% 8% 1% 2% 4% 14.2% CAGR from CAGR 8.6% 8.3% 5.6% 4.8% 4.7% 2009 Growth of plywood sales Plywood expansion to 220 000m³ regain market share 170 000m³ 120 000m³ 18 months 70 000m³ 20 000m³ 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sales Volume Market Demand York Timber Holdings Limited 7

Plywood Industry Plywood Supply Origin Countries of Plywood Imports York supplies 52% of the current market demand Imports represent 44% of total market Brazil Canada China Gabon supplied Germany Hong kong India Indonesia predominantly from Imports - 44% (6011m3) ELB - 4%(600m3) Italy Malawi Malaysia Russian Fed China and Brazil York - 52%(7230m3) Singapore Taiwan Thailand Turkey Plywood expansion USA UK Vietnam Zimbabwe will deliver increased annual capacity to Plywood sales & price evolution replace imports and R 90 10 000 R 85 9 000 will be able to further 8 000 R 80 extract value from R 75 7 000 R 70 6 000 R/m2 pruned logs R 65 5 000 R 60 4 000 3 000 R 55 m 3 R 50 2 000 R 45 1 000 R 40 - Sales m³ ASP - R/m² York Timber Holdings Limited 8 8

Processing Division (Sawmills and Plywood plant) Increased production but contributing less due to suppressed Operate 5 sawmills in selling prices Sabie, Graskop, White River and • Highlights Jessievale (including Production volume increase of 2,7% and sales volume dispatched Golden Rhino) 5,6% higher on previous year Major plywood Plywood production volume increased 3,3% from previous year manufacturing plant with investment in drying capacity in South Africa Capex at Jessievale sawmill installing finger joint capability and EBITDA R54.3 million increasing drying capacity Capital expenditure Golden Rhino sawmill re-commissioned as part of York’s fibre of R52.8 million optimisation strategy • Challenges Processing cost increases 7,5% (wages and utilities) – not absorbed by efficiency improvements Lumber selling prices under pressure – 2,3% lower than previous year York Timber Holdings Limited 9

Processing division (continued) Challenges in context York Available York continuously Technology linear meters 60 m / min 150 - 180 m / min benchmark operating Comparable to divisions locally and Productivity Rated top in RSA South America internationally Efficiency ratio (volume 47% 50% Existing recovery) infrastructure not Cost utilisation 100% 66% optimal to be an Log paying capability factor 1.5 x 2.25 x international player Mill configuration Structural Flexible Capital intensive nature of manufacturing Barrier to entry processes and high Incremental with cost give return Leapfrog but capital Capital availability continued margin challenge for intensive squeeze investors York Timber Holdings Limited 10

Forestry Division Improved selling prices and increased volume from forestry asset Total hectares 94 098 • Highlights Despite harvesting of 690 730m 3 , plantation Eucalyptus price escalation in excess of 10%, whilst above standing volume grew inflation increases from pine logs (6.4% > CPI) by 270 672m 3 Benchmarked harvesting and silviculture cost at comparable EBITDA R118.4 levels million (22% increase Temporary unplanted area at historically low supporting biological over prior year) asset valuation Capital expenditure Quality of York's biological assets (plantations) has improved R7.9 million substantially over the last few years Self-insurance plantation investment of R38 million invested to date providing cover of R100 million for each single event • Challenges Baboon damage remains an agricultural industry challenge External purchase of logs increased to R182 million with a negative impact of R28.6 million on EBITDA York Timber Holdings Limited 11

Forestry Division (Continued) • Volume growth incorporated in • Yield regulation is done in accordance discounted cash flow valuation equates to a sustainable rotation age of 25 to 949 980m 3 over rotation age years • New specie growth stock impact hybrid • Site specie matching critical to obtain maximum yield and new silviculture practises York Timber Holdings Limited 12