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Trouble at mill mars Carter's year

By Nick Stride

Friday 31st January 2003

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Carter Holt Harvey on Wednesday reported a weak finish to a strong year with fourth quarter net earnings of just $4 million.

Restructuring and other one-off costs, related mainly to the troubles of the Kinleith mill, cost $47 million over the quarter and lower international pulp prices didn't help.

Chief executive Peter Springford said pulp prices were $US54 a tonne weaker than in the September quarter but had recovered by about $US10 during January.

Commentators were picking further price increases but addressing the profitability of the pulp and paper division ­ "our area of uncertainty" ­ remained a priority.

The division lost $5 million at the ebit (earnings before interest and tax) level compared with a $6 million profit in the December 2001 quarter. Full-year ebit was $26 million.

Elsewhere in the group earnings were relatively strong. Overall full-year net earnings were $137 million, up from $25 million in 2001.

Forests contributed ebit of $32 million (2001, $21 million) for the quarter and $133 million for the full year as annual sales grew by 7%, prices strengthened and costs were cut.

Wood products contributed $29 million ($17 million) for the quarter and $96 million for the year, propelled by strong residential building in Australia and New Zealand.

Mr Springford said the Australian market looked to be softening a little but the local market was expected to remain solid.

Tissue benefited from lower pulp prices, contributing $17 million ($14 million) for the quarter and $51 million for the year.

Annual revenue was down slightly at $791 million as the division concentrated on brand-building and cost control.

Packaging ebit was $9 million ($8 million) for the quarter and $27 million for the year.

In New Zealand the demand picture was mixed. The Australian unit halved the ebit loss of last year following job cuts and price increases.

The company trumpeted its strong balance sheet as the ratio of net debt to total capitalisation fell to 19%.

But it remains in belt-tightening mode. Mr Springford acknowledged it was still not earning its cost of capital.

Projected US dollar net cash receipts for the 2003 year are fully hedged at 44USc. For the years 2004 to 2007 between 14% and 25% of receipts are hedged at between 39USC and 41USc. Australian dollar receipts are 73% hedged at 87.6Ac for 2003.

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