TWK eyes forestry acquisitions as timber export demand surges
Diversified company says its planned purchase of a 11,000ha forest in Mpumalanga and KwaZulu-Natal fell through
Diversified agriculture and forestry company TWK Investments will continue to look for potential acquisitions despite its failure to buy an 11,000ha forest in Mpumalanga and KwaZulu-Natal, says CEO Andre Myburgh.
The investment in plantations would secure security of supply in light of growing export demand, Myburgh said on Friday.
The company, which is listed on ZAR X, operates through its timber, retail and mechanisation, financial services, grain and vehicles and tyres businesses.
Speaking after the release of its results for the six months to end-February, in which revenue climbed 4% to R3.9bn, Myburgh said the mooted transaction for the 11,000ha fell through “due to pricing issues”.
He said the Piet Retief, Mpumalanga-based company is, however, on the lookout for potential acquisitions. “There is a growing demand for TWK wood chips in the export market and it is expected that export volumes will increase in the coming year with a concomitant increase in the price of exported chips,” Myburgh said. He said there had been a jump in demand from China, while demand from Japan remained stable.
“The increasing demand from international markets has made own supply even more crucial. The international market has been attractive in the past year because of the weakening rand,” he said.
In the six months, TWK’s operating profit increased 24% to R220m, while the net asset value per share was up 14% to R38.04.
TWK said it benefited from increased timber sale volumes, improved margins, cost control and effective working capital management. That was despite a 1.7% decline in fertiliser sales volumes.
Earnings before interest and tax increased 23.0% to R211.1m, while profit after tax was up 30.5% to R111.8m.
“The timber segment contributed to the growth and performance in the first six months of 2019, driven by increased timber sales. The general trading conditions came under pressure, which resulted in decreased sales and net profit in the retail segment compared to the previous period,” Myburgh said.
The company attributed the 1.7% drop in fertiliser sales to later-than-normal rainfall in certain areas of the country and competition in the market.