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Deane rallies the troops at Fletcher AGM

By Phil Boeyen, ShareChat Business News Editor

Thursday 2nd November 2000

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Fletcher Challenge has defended its flailing Forests' shares with chairman Rod Deane saying the stock still has fundamental value despite the sell-off by short-term shareholders.

FFS shareholders have been the most disgruntled from the Fletcher stable of stocks since the company announced last month it was planning to make Forests a stand-alone company as part of company restructuring. The stock has dropped by around two-thirds since the announcement, and was trading Thursday down 4 at 31 cents.

Mr Deane told shareholders at the Fletcher AGM in Auckland that the separation of its Forests has not been helped by the timing at the bottom of the log price cycle.

"The board expects the share price to move upward over time as investors recognise the fundamental value. Despite this fall in share price nothing has changed the underlying value of Fletcher Challenge Forests."

Depressed log prices have also been cited by Fletcher as the reason it has rejected offers by Chinese-owned Citic New Zealand to buy it out of their Central North Island Forests Partnership, saying the current value of the stock is too low.

More than 93% of Fletcher shareholders voted in favour of the proposed offering of Fletcher Challenge Forests' Rights and Preference Shares at the meeting, and Mr Deane welcomed the positive result.

"In voting for the rights issue, shareholders have recognised the potential value that can be unlocked by recapitalising the division in this way. It is a vote of confidence in Forests' strategy."

Mr Deane also told the meeting that the company is still prepared to set its Energy division up as a stand-alone company if the sale to energy company Shell does not proceed.

Shell is awaiting a ruling from the Commerce Commission to a second application to take over Fletcher Energy after its first application was denied.

"Although the Shell/Apache deal remains the board's preferred option, the stand alone option is a sustainable and realistic alternative," says Mr Deane.

In relation to the Building division, FLC chief executive Michael Andrews told shareholders that the company did not expect a recovery in New Zealand's residential construction activity until next year.

"Residential construction appears to have moved off its low, but New Zealand's economic environment and low dollar will keep consumers somewhat cautious."

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