Pulp rally makes life easier for Carter Holt Harvey

Friday 18th June 2004

Carter Holt Harvey shareholders are used to bad news so it might come as a bit of a surprise that things are actually looking up.

While prices for logs remain turbulent, pulp pricing has made a vigorous recovery on the back of an improvement in paper demand as the global economy continues to recover.

Major northern hemisphere pulp producers have recently announced $US30 a tonne price rises, taking price listing to $US680 a tonne, the highest since January 2001.

So what does this mean for Carter Holt Harvey? First NZ Capital says, roughly speaking, a $US100 movement in the price of pulp is worth $US50 million earnings before interest and tax (ebit) to the company. It expects pulp pricing to average $US145 a tonne higher this financial year than last year, helping push total ebit up to $350 million from $315 million last year, despite forecasting much lower foreign exchange gains.

Carter Holt is expected to make a decision on its forestry estate by October.

There is much speculation about what its disciplined approach to expansion will bring and whether a review of its forest estate, the largest in the country, will come up with a different ownership structure or sales of forests.

Analysts note that it is still unclear whether any forest sale would have tax implications for the company.

In the meantime, shareholders will be heartened by the performance of Carter Holt's offshore businesses and a better-than-expected outcome from the sale of the Tissue division.

The company has also received court orders to return $480 million to shareholders on a pro rata basis following that sale and shareholders are set to approve the return via a special resolution at a meeting scheduled on July 22.

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