Our opinion on the current state of YRK

York Timber Holdings (YRK) is a forestry company which owns plantations and processing plants, as well as a wholesaling distribution network. It is the biggest player in the South African plywood and timber market. The company was founded by a Russian immigrant, Herman Katzenellenbogen in 1916. The company was listed on the JSE in 1946. The National Union of Metalworkers of South Africa (NUMSA) is the majority union at the company. York has obviously also been impacted by the general malaise in the construction industry since the commencement of the sub-prime crisis in 2008. In July 2007, York's shares reached a peak at R40. Since then the share has mostly been falling or drifting sideways until October 2020 when a new upward trend appears to have begun. On 27th July 2021 A2 Investments acquired additional shares in the company to increase its stake to 18%. This had the effect of pushing the share price up to 243c. On the 13th of May 2022, the company announced that a strike at its Escarpment operations would negatively impact on its production. Escarpment contributes 51% of the company's revenue. On 5th December 2022 the company announced its intention to conduct a rights issue to raise R250m. Existing shareholders would receive 43,12791 new shares for every 100 shares already held at a price of 175c each. The announcement obviously caused the share price to drop sharply. In its results for the six months to 31st December 2022 the company reported revenue down 7% and headline earnings per share (HEPS) of 11,9c per share compared with 17,11c in the previous period. The company said, "Despite only being fully operational from August 2022, after the June/July 2022 strikes, production volumes increased over the comparative period. External log prices increased on average by more than 11%, despite lumber prices declining by 3% over the comparative period". In a trading statement for the year to 30th June 2023 the company estimated that financial results would vary by at least 20% from the previous year. The company said, "Profitability for the Current Period has been impacted by price increases in external logs purchased and operational costs which could not be recovered in selling prices". The company has about R180 000 worth of shares changing hands each day which makes it practical for private investors. Technically, the share has been moving down since the beginning of 2022. It remains a volatile construction-linked counter.