Forestry puts pressure on GE's book

By Deborah Hill Cone

Friday 23rd July 2004

When it's a tough year for forestry, it's a tough year for its bankers as well and GE Commercial Finance felt the pressure last year.

"Forestry is a significant sector for us," Bailey said, estimating it made up 20-30% of GE's book.

He said when GE set up here it did not have significant forestry experience from its existing operation in Australia, but the New Zealand entity it inherited from AGC had long-term relationships with forestry customers.

Last year the forestry sector went through significant upheaval as a result of the rising Kiwi dollar and increases in international freight forwarding rates, Bailey said.

New Zealand lost international price competitiveness as a result, which put pressure on that part of GE's loan book and forced GE to re-evaluate its approach.

Bailey said it cut its forestry clients some slack. "We decided to stay with the sector. Our line was we would work with them and try to understand if the substantive business case made sense, and in most cases it did."

GE's forestry customers include those contractors involved in cutting and hauling logs to others processing them ready for sawmills.

Bailey said by extending terms or deferring payments GE made it possible for many of its forestry customers to stay in business.

"Our growth rate now is not in that segment. But that will change, over time, it will pay off ... we have ridden the downturn and over time it will resolve."

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