70 INTEGRATED ANNUAL REPORT 2026 The 2026 financial year began on a positive note, with the final receipts of insurance proceeds from the 2023 fire claim, a promising export order book and mills operating at normal capacity. We set our budgeted exchange rate at a realistic yet not overly conservative level. We anticipated that we would not have to adjust mill delivered prices (MDPs) due to exchange rate impacts. We were positioned for a strong year after the challenges experienced over the past few years. The exchange rate lived up to its reputation as one of the most volatile in the world and, after hovering around the budget exchange rate for the first month, peaked at close to R20:USD before it started to strengthen. The cash benefit of having taken forward cover at these higher rates, together with the fact that we had rebuilt the cash reserves used after the fire, allowed us to maintain MDPs as the exchange rate continued to strengthen throughout the year. Eventually, in December 2025, we had to decrease the MDPs to operate responsibly and in line with market conditions. Despite the challenges posed by the strong exchange rate, financial performance for the year was good. The Co-operative made a small profit and closed the year with R361 million in the bank, R68 million less than the prior year. After two years of reduced volumes and revenue, timber volumes almost reached our two million tonne Chief Financial Officer’s Report 2026 KERRY MOFFETT optimum level and revenue reached R3.4 billion, only the second time we have exceeded R3 billion. Exports made up 86% of total Co-operative revenue. The hedging policy continued to work well, as the forward cover taken when the exchange rate was at its weakest helped to extend the cash reserves when the exchange rate strengthened. The Co-operative distributed more than 80% of its revenue to members through timber prices and premiums. Once again, unfavourable fair value adjustments to our biological assets negatively affected the results of the Co-operative and Group. The MDP decrease, alongside rising costs, means that the value of the asset is eroded. We understand that members are experiencing these pressures within their own operations, and we are actively exploring ways to assist and mitigate the impact. The farms made a small profit before plantation adjustments, contributing to the FSC volumes and Smithii projects while maintaining reservoir status. Insurance continues to be one of the highest individual expense items, after salary and wage costs, repairs and maintenance, and utilities. The Richards Bay mills were insured at full value during the current financial year, which increased the cost; however, the extent of the cover is now more comprehensive than ever before.
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