Carter Holt cools as investors await progress

Friday 7th May 2004

Carter Holt Harvey's share price suggests investor sentiment toward the wood processing company has cooled following a disappointing first -quarter result.

After a good run in the 12 months to March, the share price has since dropped from a high of $2.30 to around $2.05 in the middle of this week.

Analysts said the drop was not surprising.

The company last month reported an operating profit of $68 million for the first quarter this year, down $9 million on the previous corresponding period and $13 million on the previous quarter.

Excluding foreign exchange gains, restructuring costs and a $9 million share growth plan charge, earnings before interest and tax came in at $43 million, well below analysts' expectations.

A disappointing wood products performance was offset by a better than expected result for pulp and paper, combining for a cloudy price outlook, analysts said.

There is some good news, however. Smurfit-Stone, the largest producer of containerboard in the US, recently announced a 12% price increase to US$460 a tonne, causing a rally in paper stocks including International Paper, which owns 51% of Carter Holt.

Given containerboard is Carter Holt's third-largest exposure, this can only be viewed as good.

The company has already announced a 5% containerboard price increase in Asia and signalled another similar increase for May.

Macquarie New Zealand has factored in peak prices of $US455 a tonne for the fourth quarter, compared with an average price of $US390 a tonne for the six previous quarters.

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