According to Google’s AI overview, the lifecycle of a pine tree grown for timber is typically 25 to 35 years. The first 12 years are about early growth and management. In years 12 to 20 the focus is on thinning and mid-life growth, giving the best trees more room and sunlight. Final maturity and harvest happen thereafter.
In the note dealing with biological assets in the results for the year ended June 2026, York Timber notes that a single-rotation harvest cycle is 20 to 23 years for pine and 14 years for eucalyptus.
Whichever stat you use, here’s why it’s relevant: the last time that York Timber paid a dividend was in 2005. Based on its own disclosure, the company has been through an entire harvest cycle without paying a cent of dividends to investors.
Strictly speaking, dividends aren’t the best way to assess value creation. After all, Berkshire Hathaway has only paid one dividend in its history. Warren Buffett is on record as joking about “being in the bathroom” when the board made the decision to pay that dividend back in 1967.
But York Timber isn’t Berkshire Hathaway. And if there’s anything in the bathroom, it’s the share price that has been flushed down the toilet over the years.
When York paid that dividend back in November 2005, the stock was trading at around 400c. Today it trades at about 200c. York has lost half its value since 2005 and hasn’t paid a cent in dividends to compensate shareholders for that pain.
There are value traps in this world, and then there are value deserts where there seems to be no way to escape the heat.
Despite such an obvious bear case, André van der Veen and Adrian Zetler of A² Investment Partners decided to get involved in 2021, building up a stake, through various entities, of 43% in the company. Many value investors have taken a long look at York, but only the brave would get involved to that extent.
The company has welcomed Schalk Barnard as the new CEO with effect from September 1. If there’s a bull case for him to demonstrate, it’s hiding behind an ugly set of numbers for the year ended June 2026. Revenue fell by around 2.2%, with a decline in plywood sales overshadowing the growth in lumber sales. That doesn’t sound too bad, but headline earnings from continuing operations fell by a nasty 53%.
The pressure from imports drove an impairment of R15m to the plywood cash-generating unit. Impairments may not be a cash cost, but they still provide an indication that all isn’t well. The difficulty in assessing impairments pales in comparison to what goes into the biological asset calculations. These fair-value adjustments can cause wild swings between profits and cash flows at York.
If you look at the reconciliation of changes in biological assets, you’ll see large adjustments for the levels of growth and harvesting. That’s logical enough. The trickier line is the adjustment to timber values due to current market conditions and discount rate assumptions.
Technically, as York is required to perform this fair-value calculation on its plantations each year, the NAV (or book value) of the company should be a useful metric from a valuation perspective. Across noncurrent and current assets, the biological assets are responsible for R3.45bn of the R5.12bn total assets on the balance sheet. A further R592m sits in inventories, trade receivables and cash. These are lines that the market would theoretically see as a near-term source of cash flow.
But the market isn’t buying these values. York’s market cap of R972m is a 70% discount to the group’s reported NAV. At a price/book of 0.3 times, investors aren’t forming an orderly queue to own this stock.
If the discount to NAV is going to close, York will need to show an ability to generate cash. Over financial 2025 and financial 2026 combined, its net performance was a negative move in cash and cash equivalents of R4.1m. Remember, that’s without paying any dividends or executing any share buybacks.
There’s really only one question that needs to be asked of York’s management: what will come first, the dividend or the wood?
There might be a value unlock here, but nobody seems to be able to find the key. Based on the past 20 years, investors would be better off visiting the plantations with their mountain bikes than investing in them.
