Evergreen: more writedowns coming

By Nick Stride

Friday 31st October 2003

Investors should brace themselves for further writedowns in forest values, Evergreen Forests chairman Peter Wilson warned this week.

At the annual meeting on Wednesday an uncomplaining group of shareholders heard a gloomy short-term tale but Mr Wilson pointed to a more cheerful long-term future.

One dose of cold water came from Fletcher Challenge Forests' negotiations to sell its estate at a little over half its 2002 carrying value.

Another came from Carter Holt Harvey's indication it was considering a $900 million cut in its forests' value.

But the interest of US pension funds in the Central North Island Forest (CNI) estates and in Fletcher's forests might reflect "that the opportunity to get the best risk-adjusted forestry sector return in the world is right here, right now", Mr Wilson said.

He explained after the meeting that, even though log prices were moving up, valuers were likely to use the Fletcher Forests transaction and Carter Holt's revaluation as benchmarks to value forests at companies' next balance date.

Although the price Harvard Management Company paid for the Central North Island forests hasn't been disclosed it is thought unlikely to have been much more than the $US650 million ($1.06 billion) Fletcher Forests and Citic offered last year.

Mr Wilson said China's decision to recognise New Zealand radiata pine as an allowable material in its building code would have no large short-term benefit for Evergreen. But the increasing volumes of local wood going into China's voracious market would be a significant driver of New Zealand forest valuations in the future.

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