58 INTEGRATED ANNUAL REPORT 2025 NCT Forestry Agricultural Co-operative Limited and its subsidiaries (Registration number: 1949/000002/24) Annual Financial Statements for the year ended 28 February 2025 Directors' Report 2 2. Review of financial results and activities The consolidated annual financial statements have been prepared in accordance with IFRS for SMEs® Accounting Standard and the requirements of the Co-Operatives Act no. 14 of 2005. The accounting policies have been applied consistently compared to the prior year. The group recorded a profit after tax for the year ended 28 February 2025 of R132,532 million. This represented an increase from the profit after tax of the prior year of R61,828 million. Group revenue decreased from R2,941,515,000 in the prior year to R1,865,539,000 for the year ended 28 February 2025. The group faces a number of risks and uncertainties. The two largest identified by the directors are the underperformance of state-owned entities and the exchange rate risk, while additional legal compliance requirements are also major risk items. The underperformance of state-owned entities, particularly Transnet operating the ports and rail, has had a significant impact on business over the last few financial years and the management of NCT have invested significant time and energy in working alongside the authorities, trying to find workable solutions. This continues to be the highest risk that the group faces. Demurrage costs for the year, mostly as a direct result of port issues, were in excess of R13 million. Rail transportation continues to decline in favour of road. As the group operates in the international arena, it is subject to currency risk with respect to the Rand: USD exchange rate. During the year, the exchange rate achieved on export receipts ranged between R17.34 and R19.42 with an achieved rate of R18.50 : USD. If the exchange rate achieved had averaged the low or high rates achieved during the year, the revenue and profit before tax would have been lower or higher by R82 million or R70 million respectively. The co-operative purchased 1,342,640 tonnes of timber from members and suppliers during the year under review. These were sold into local markets and supplied to group mills. RBWC chipped 266,763 green metric tonnes (GMT) (2024: 297,560) of timber, 107,045 GMT of which was chipped for Biomass using the mobile chipper. RBWC contracted BayFibre to chip 229,650 GMT (2024: 362,051). RBWC exported 8 vessels (2024: 11) comprising 241,639 bone dried tonnes (BDT) (2024: 302,418) to 4 customers in Japan and China. In addition, a further vessel was loaded on behalf of a local exporter comprising of their timber chipped by the mobile chipper at RBWC as well as 2,977 GMT from the RBWC stock. DWC contracted NCT Durban Wood Chips (Pty) Ltd to chip 394,259 GMT (2024: 605,831) and load 248,290 BDT (2024: 447,320), exporting 8 shiploads to 2 customers in Japan. The major contributors to the co-operative's results are: - Insurance proceeds of R280,7 million of which R277,8 million relates to the Richards Bay fire (2024: R0,8 million) - Net financing income of R16,0 million (2024: R16,7 million) - Loss reported by NCT's farms, before plantation adjustments, of R19,7 million (2024: R110,0 million profit) - Unfavourable fair value adjustments to NCT's own and leased plantations of R71,8 million (2024: R47,7 million favourable) - Net foreign exchange gain of R12,8 million (2024: R16,5 million loss) - No members' bonus (2024: nil) is proposed for the current year. The co-operative and group have posted profits for the year only as a result of the significant insurance proceeds received. The group results before tax would have been a loss of R216 million without the receipt of insurance proceeds for all 3 mills. Although the Richards Bay mills have been operating for a few months, the impact of the fire combined with the impact of DWC being closed for some months of the year after the loader incident has resulted in a significant reduction in the volumes processed by the group during the year, contributing to a decrease in revenue. Operating costs have reduced despite many operations starting to normalise again after the fire. Property, plant and equipment have increased mainly due to rebuilding and replacement of assets after the fire with a corresponding increase in interest bearing liabilities being a bank loan used to finance the rebuild. Biological assets have decreased as a result of slightly lower prices alongside inflationary increases in direct costs. Inventories have increased substantially over the prior year as chipping has re-commenced at the Richards Bay mills. In addition, two ships were loaded shortly after the year end which resulted in high year end stocks. The remaining farms held in ShinCel (Pty) Ltd after the sale of 4 farms in 2023 to its neighbour were sold to SAPPI on 29th November 2024. Proceeds of just under R55 million were received for the asset comprising standing timber, land and buildings. It is the intention of the directors to deregister the company once operations have been wound up.
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