By Phil Boeyen, ShareChat Business News Editor
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Wednesday 25th July 2001 |
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CEO Chris Liddell has told the company's AGM that while internal measures such as operating performance are important, so are external measures such as share price, dividends and profitability.
"We have to win on that basis, and until we do, we can ask for your support, but we should also expect continued pressure for results.
"You have our commitment that until we have succeeded in the measures that are important to you, we will improve our performance, innovate, and lead this business forward to a better future."
Carter Holt last week announced a sharp fall in first quarter results, operating earnings before restructuring items falling to $31 million, down from $120 million for the same period last year.
After interest costs and one-off restructuring charges the company had a $34 million net loss for the quarter. A major write-off was for $25 million for the Mataura paper mill and Mt Burr sawmill.
Mr Liddell says although the company's full year profit of $35 million to the end of March was a reasonable one, it was a year of two halves with a strong first half and a very weak second half.
"This weakness continued into the latest quarter, and was reflected in the June quarter's earnings announced last week.
"Realisations in both export and domestic markets were lower due to the economic slowdown in Korea and Japan, and weaker domestic structural markets."
Mr Liddell says with Australian housing start approvals picking up and pulp prices now below the cash costs of a number of world producers, there are reasons to suggest the worst of the current set of cycles is behind the company.
"Clearly the shape and speed of any improvement will depend on the underlying growth in the world economy, and it may be later this calendar year that we see significant improvement."
The company has also put paid to any suggestions that, with over 55% of its sales generated outside New Zealand, it may consider moving its head office overseas.
"I am often asked whether there are any plans to re-locate the head office of the company outside of New Zealand, but I am happy to say none currently exist," says Chris Liddell.
Chairman Sir Wilson Whineray told shareholders that although the term "disappointing" has almost become a cliché in times like this, it is the right word to use for the company's annual result.
"We are disappointed at the outcome. In the past year our financial performance improved markedly.
"We continue to reduce costs, improve our operational efficiency and strengthen our leadership position, so it is difficult to feel anything other than disappointment when we have not achieved a commensurate increase in profits."
Sir Wilson says that although Carter Holt has improved operational efficiency, manufacturing effectiveness, administration and support, procurement, distribution and marketing, so have its competitors.
"Gains that have been made ultimately become eroded as competition increases in our markets, especially at a time of market weakness. The gains made only hold if prices for our products remain firm.
"What we have achieved has left us better placed to weather the downturn in the second half of the year, but it by no means completely insulated us against it."
Shareholders were also told that although they may have preferred the $2 billion the company received from selling Chilean assets to be distributed, the prudent approach has been to reduce debt and invest for the future.
Sir Wilson says in particular the purchase of Norske Skog's Tasman kraft pulp business has been significant.
"It has given us regional leadership in a business we know well. We now own two of the lowest-cost softwood pulp producers in the world in terms of delivered cost to Asia.
"Our investment has given us operational and marketing advantages, a stronger customer base in Australasia and Asia and significant opportunities for product development."
The chairman also pointed out that despite the conventional wisdom that the relatively low dollar is a boon to exporters, the currencies of competitors in Australia, Chile, Finland, Sweden and Russia have also declined relative to the US dollar.
"Over the last two years, for example, while the New Zealand dollar has fallen by 24%, the Australian dollar has fallen by the same amount, the Swedish krone by 28%, the Finnish markka by 22%, the Chile peso by 21%, while the Russian rouble collapsed three years ago.
"These countries all produce products that compete in the same markets as we do."
Sir Wilson says there is little the company can do to influence the price cycles it experiences, but has to concentrate on the factors that it can control such as costs, the ability to add value through innovation to products, and market positions.
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