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Tide coming in, says Carter Holt Harvey

By Nick Stride

Friday 4th August 2000

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Carter Holt Harvey is pushing ahead with its "price leadership" strategy of pursuing price rises regardless of market share loss.

Announcing sharply higher $90 million June first-quarter earnings chief executive Chris Liddell said the strategy of lifting or at least holding prices had cost the company market share in some markets such as Asian logs.

Overall, he said, the result was pleasing "but I'd still describe it as work in progress."

Operating earnings were up 124%, to $123 million. Revenue rose 30% to a record $951 million.

In the same quarter last year the company made only $13 million following the collapse of log prices stemming from the Asian downturn.

"While the tide has been going out on us (over the past two years) it is starting to come back in," Mr Liddell said.

It had been a year of "good strong cash flow" but the outlook for Carter Holt's individual markets was mixed.

Asia was generally strong and the low exchange rate of the New Zealand dollar was helping export returns.

But the Australian economy was looking weaker. "I don't know whether that's a general slowdown or a post-GST effect," Mr Liddell said.

New Zealand was the weakest market at present with a slowdown in the housing market.

"There's a real danger in my view that we're talking ourselves into a negative position."

Earnings before interest and tax (ebit) for the forests division doubled to $24 million, mainly on increased sales volumes in the domestic market.

Wood products ebit rose $21 million to $31 million due to improved productivity, solid markets and the addition of the Australian panels and sawmill business.

"We think we can get price increases despite a possible softening of the Australian housing market," Mr Liddell said.

Pulp and paper ebit rose $51 million on higher prices for export pulp and linerboard.

The smallest division, distribution, lifted ebit $1 million but was starting to feel the effect of the housing slowdown.

The result included a $10 million charge from last month's mothballing of the Mataura paper mill.

The quarter was the first in which there was no earnings contribution from Chile's Copec, which was sold earlier this year.

Mr Liddell said the new venture capital fund had attracted some interest and was expected to be investing by the end of the year.

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