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Yorkcor adds its weight to Safcol privatisation
FORESTRY
AS THE privatisation pace for the state-owned SA Forestry Company (Safcol) picks up, the first local timber company - JSE-listed Yorkcor - has announced its intention to participate. Meanwhile, it appears unlikely that the Competition Board, which has just finalised a two-year investigation into Safcol, will force the company to split its forestry and sawmilling interests. The board has in previous cases applied the principle of proportionality, which, says chairman Pierre Brooks, means "avoiding using the sledgehammer to kill the fly". Instead, the board could announce measures such as ringfencing Safcol's operations and ruling out cross-subsidisation between them. None of the four privatisation options tabled by government for Safcol involve splitting the forestry and sawmilling divisions, although analysts expected a board ruling in this respect given Safcol's control over log supplies to the sawlogging industry. The Department of Public Enterprises announced this week that FBC Merchant Bank, Kagiso Financial Services and Real Africa Durolink had been shortlisted as Safcol's transaction advisers. The department has said that a majority stake in Safcol will be sold by the end of the year, although the sale has been delayed by land claims. Analysts have placed a R1-billion value on Safcol, which reported sales of R573-million and net income of R22million in the year to end-June 1997. Yorkcor chairman Solly Tucker says the company will use its relationship with Madiba Mills, the country's only black-controlled sawmilling company, to "get involved in the Safcol process". Madiba Mills is run by Nthato Motlana, son of the prominent businessman. Tucker, at the release of Yorkcor's 1997 results, said he would favour Safcol's unbundling, but that its privatisation and the sale of former homeland forests "unlock openings for Yorkcor". Last year Yorkcor won court cases against the Department of Forestry and Safcol which gave it court backing for the long-term security of log supplies from these two parties. In terms of the rulings - the department has appealed against the decision affecting it - Yorkcor's "evergreen" entitlement to all sawlogs from Safcol and government plantations contracted to the group have been upheld. "This vindicates our decision in 1993 not to agree to new contract negotiations with Safcol," says Tucker. With one or two exceptions, Safcol renegotiated its supply contracts with independent sawmillers. "We now have a secure supply of logs indefinitely. Furthermore adequate compensation is expressly promised for terminating the contract - the worth of our company is thus effectively guaranteed by government," Tucker adds. Yorkcor reported attributable profit of R4.3-million for last year from a loss of R7.2-million in 1996. This equates to headline earnings of 28.2c a share (1996: loss of 47.2c), from which a dividend of 15c was declared. The turnaround was due to a 30% rise in sales to R57.3-million but the operating performance was boosted by "stern belt-tightening". The balance sheet also has a healthier look. Gearing has improved to 28.4% from 43.3%. Top of page
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