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Falling pulp price and strong dollar hurt CHH in quarter


Friday 21st January 2005

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Forest products company Carter Holt Harvey today posted a robust annual profit, but fourth quarter earnings faltered under pressure from falling pulp prices and the strong New Zealand dollar.

Chief executive Peter Springford told a media briefing these external factors meant the company had been working against "head winds" in the fourth quarter.

"Overall we've operated well...however, FX (foreign exchange), freight rates, and therefore commodity prices in New Zealand dollars have made things difficult," he said. Operating earnings before interest and tax (ebit) for the fourth quarter fell to $62m , down from $71m the previous quarter and $81m the same time the year earlier.

Operating ebit for the full year was $259m, down from $315m.

The $1.02b sale of its tissue business earlier last year helped push up the company's net profit. Net earnings for the year-ended December was $435m, up from a $656m loss the previous year. Net profit for the December quarter was $26m, up from an $87m loss the previous quarter.

Springford said the company had set out to replace the earnings from the tissue business by growing its wood products and packaging businesses.

After selling the tissue business Carter Holt bought the China-based premium panels business Plantation Timber Products (PTP) and recently entered agreements to buy Tenon's Structural Solutions business as well as Australian packaging firm Wadepack.

Springford said the purchase of PTP, as well as the proposed acquisitions of Structural Solutions and Wadepack would replace 95 percent of the tissue business' earnings using less than half of the proceeds of the tissue sale.

The current year will see further change for the forest products company, with the possible sale of one-third of its 327,000 hectare forest estate. An information memorandum will be available by the end of the first quarter and Carter Holt said there had been a high level of interest from potential purchasers.

Springford warned that the first quarter of the current financial year would be difficult. Pulp prices took a US$92 a tonne fall early in the fourth quarter, and while they rebounded US$30 a tonne in December Springford said further hikes were not expected until after the Chinese New Year.

Other factors that will impact first quarter earnings was an expected downturn in housing markets on both sides of the Tasman, as well as the US dollar which continued to look soft.

Springford said first quarter earnings were traditionally $15m to $20m weaker than the December quarter.

Carter Holt returned $583m to shareholders during the year via dividends and a share cancellation, and today announced a final unimputed dividend of 4 cents per share. Shares in the company fell 2c to $2.06 in a broadly weaker market, having ranged between $2.01 and $2.72 over the past 12 months.

Carter Holt Harvey full year results by division

Pulp and Paper: Sales $735m, up from $635m the year-earlier; Ebit $63m, up from $54m.

Packaging: Sales $468m, down from $483m; Ebit $34m, up from $30m.

Forests: Sales $553m, down from $592m; Ebit $79m, down from $92m

Wood Products: Sales $1,875m, up from $1,818m; Ebit $72m down from $87m.

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