Integrated Timber

Forestry and timber manufacturing operations with primary and secondary upgrading processing

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PG Bison harnesses the benefits of an integrated business model by owning and managing its own resin, forestry and timber operations with primary manufacturing and value-adding facilities.

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integrated-timber-icons-green-01

PG Bison harnesses the benefits of an integrated business model by owning and managing its own resin, forestry and timber operations with primary manufacturing and value-adding facilities.

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480 000
TONNES OF RESIDUE
FIBRE CONSUMED
43 892 hectares
PLANTED FORESTRY LAND
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95 000
TONNES OF UF RESIN
PRODUCED
1 489
EMPLOYEES
49 million m2
OF IMPREGNATED PAPER PRODUCED

“Our aim is to be the leading manufacturer and primary upgrader
of timber products in our chosen markets.”

– Gerhard Victor

“Our aim is to be the leading manufacturer and primary upgrader of timber products in our chosen markets.”

– Gerhard Victor

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Business environment

PG Bison services the retail, construction, furniture manufacturing and residential development sectors with a variety of timber products, primarily in southern and eastern Africa and Australia. This diversity of geographies and sectors consistently supports the underlying demand through the business cycles.

The South African market continues to evolve, with consolidation taking place in the DIY retail sector and customer fragmentation in the furniture, construction and development, merchant reseller and manufacturing sectors. Through its continuous investment in product development, marketing activities and manufacturing technology, combined with the integration of its key raw materials, PG Bison is well-positioned to capitalise on this changing environment.

Commentary

The Integrated Timber division performed well for the year, showing 12% revenue growth to R4 031 million from R3 612 million in the prior year. The resin manufacturing and paper impregnation operations are now reported as part of this division. (They were previously reported in the Chemical segment.) Resin manufacturing and paper impregnation represent key raw materials in the manufacture of panel products. Prior year numbers have been restated accordingly.

The division continued to implement its strategy of increasing its volume capacity and value-added product and service offering, with investments in product development, marketing, supply chain and new technology during the year. The division benefited from deferred annual maintenance shuts at three of its operations. In order to minimise production downtime, this maintenance will be done in 2020 to align with the planned plant capacity expansions and technology upgrades. The additional production volume, due to the deferred shuts, created the opportunity for increased sales and higher overhead absorption. Sales were supported by the growth in new products.

The southern Cape forestry, sawmilling and pole operations were impacted by the significant fires experienced in 2017  and 2018. The division suffered a R68 million negative effect on operating profit compared to the prior year, due to the timber supply of salvaged burnt timber into the sawmill and pole plant, as well as the short-term supply balance in the region.

The treated paper and resin operations performed well for the year, with increased volumes and sales mix in line with the integrated performance of the panel business.

Despite the negative operational impact that resulted from the fires, PG Bison’s operating profit remained stable.

Outlook

PG Bison’s access to key raw materials in the form of timber from its own plantations and its own manufactured impregnated paper and resin, remains a long-term strategic imperative that mitigates anticipated timber supply constraints in South Africa, as well as upward raw material pricing pressure. The focus of the division remains on providing value-added products and improving operational efficiencies through investing in technology and creating a culture of innovation and customer-focused service delivery.

While market conditions are expected to become more challenging in the near future, the division is implementing mitigating initiatives. Investments totalling R200 million for the replacement and expansion of the primary plants to manufacture particleboard at Ugie and Piet Retief will be commissioned in February and March 2020 respectively, adding an additional 8% of particleboard capacity. An additional MFB upgrading press was successfully commissioned in August 2019 in Piet Retief. This added value to particleboard in line with PG Bison’s strategy to grow the volume of value-added products. The additional capacity, together with continued investments into new product development and marketing activities, will facilitate growth in market share, revenue and operating profit. These initiatives will also assist to mitigate the effects of the maintenance and upgrading shuts planned for part of FY20.

Following the fires in 2017 and 2018, the southern Cape division has adapted the rotation age and planting densities of its plantations. The division will spend R60 million on upgrading the processing capabilities in order to optimise utilisable timber volume and to support its strategy. The operation should be well poised to deliver sustainable, improved operating results in the future.

PG Bison remains committed to growing its supply of products into non-South African territories to facilitate a sustainable and diversified revenue base, and to promote economy of scale benefits at its operations.

The division will continue to pursue its strategy through investments in its products, customers, employees, systems and manufacturing assets to produce quality, fit-for-purpose products at the lowest cost.

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