Thursday 31st May 2018
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Fletcher Building's Laminex NZ unit has exited a 10-year investment in a Southland medium density fibreboard plant with Tokyo Stock Exchange-listed Daiken getting clearance to buy the 124ha site at Mataura, Southland.
Daiken convinced the Overseas Investment Office with a plan to increase capacity at the facility, which was likely to increase New Zealand's exports and drive up demand for pulp logs. Daiken has an existing MDF plant in Rangiora, north of Christchurch. It has acquired Dongwha New Zealand from South Korea's Dongwha International and Laminex, gaining its Patinna subsidiary that owns the Southland site.
The sale price was withheld, however, last September, the Nikkei Asian Review reported that the deal was thought to be worth about 10 billion yen (US$89.7 million). Daiken already has production centers in New Zealand and Malaysia and is hoping to expand operations through Dongwha's sales networks in Oceania and North America, the Review wrote at the time.
Alongside the release of the OIO decision, Daiken released Dongwha NZ's 2017 report, providing a snapshot of returns at the Southland plant. It made sales of $87.6 million in calendar 2017, up from $91.6 million the previous year but costs ate up most of the gains and net profit actually fell to $4.8 million from $7.7 million.
Dongwha notes the change of ownership and also discusses its going concern status. As at balance date the company was reliant on the continuation of bank facilities and related party loans. One has subsequently matured in April and another comes up in August. However, Dongwha International had provided a letter of support for the NZ company valid for 12 months from the date the 2017 financial statements were approved and another member of the group has guaranteed its external bank funding, notes to the accounts show.
"The directors expect the funding arrangements of the company to be updated with the new owner upon completion of the sale of shares to Daiken," the notes say. Interest-bearing debt was about $21 million at Dec. 31, down from about $32 million a year earlier.
Sales to related parties were a big part of its income. Dongwha International bought $34 million of goods last year.
Laminex Group, which acquired 20 percent of the company in 2007, bought $14.8 million of goods in 2017.
Fletcher is retaining its Laminex business in a strategic overhaul led by chief executive Ross Taylor that includes a stronger balance sheet. At the same time, it is seeking buyers for its two main businesses outside Australasia - Formica and the Roof Tile Group. Taylor said in April that restructuring poorer performing Australian businesses was part of his turnaround plan, although "Laminex and Stramit [steel products] are performing well."
Taylor hasn't completed his strategy for Fletcher and plans to make a substantive announcement in June.
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