By NZPA
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Wednesday 16th October 2002 |
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Carter Holt, just over half-owned by the world's largest forest products company International Paper, announced its results in Sydney for the first time.
In a statement to the New Zealand Stock Exchange, Carter Holt said its unaudited operating earnings before interest and tax were $251 million for the nine months, up 156 per cent on the $98 million made a year earlier.
Net sales for the nine-month period were $3.05 billion, compared with $2.96 billion in the same period last year.
All segments improved during the nine months to September compared with the same period last year, particularly wood products.
However, chief executive Chris Liddell said that although the overall result for the company was strong, with underlying business performance consistently improving, results were unsatisfactory at the company's Kinleith mill.
"For the third quarter in a row Kinleith has failed to be profitable, with losses for the year now at over $13 million. Reinvestment or expansion on this basis is clearly unlikely."
Up to 390 Kinleith Mill workers - nearly half the mill's workforce - face redundancy in proposed restructuring.
"Kinleith has an important role to play in the future of the New Zealand forestry industry," Mr Liddell said.
"However, this business will not fundamentally change and improve until we fully implement the restructuring programme previously outlined, which has been subject to consultation for over six months."
Carter Holt also announced it has entered a conditional agreement to buy Starwood Australia's Medium Density Fibreboard (MDF) plant at Bell Bay in Tasmania for about $A50 million ($NZ57.8 million).
Mr Liddell said the acquisition was consistent with the company's investment criteria.
"Our Australian wood products businesses are now averaging a cash flow return on investment of 15 per cent - well above our cost of capital," Mr Liddell said.
"This acquisition builds on our purchase of CSR's panels business in 2000 and our expertise in wood processing means we can enhance the earnings of the business and deliver returns in excess of cost of capital."
The plant is equipped with modern technology and has 180,000 cubic metre capacity.
The transaction is expected to be completed in December, and the business will be consolidated into Carter Holt Harvey Pinepanels.
Looking ahead, Mr Liddell said the outlook for the businesses focused on the Australasian market was "relatively good" but the future was not so bright for divisions exposed to the global markets.
"We will go into the fourth quarter with our businesses operating well, with potential for further improvement at Kinleith and other manufacturing sites, and with good momentum on our cashflow generation initiatives.
"We are more cautious of the position for our businesses dependent on global markets.
"The global outlook continues to be uncertain and there is downside risk on price for our log and pulp and linerboard commodities."
The company's net debt to total capitalisation stood at 21 per cent, largely as a result of a decrease of about $200 million in working capital since June 2001 and a reduction in annual capital spend to $170 million.
Carter Holt additional cashflow totalled $305 million in the past nine months, including the proceeds from the sale of BJ Ball and Raleigh Paper, and reduced interest costs.
"Going forward, continued focus will result in further positive cashflow generation," Mr Liddell said.
In the forests division, international prices were steady for logs but the outlook for the key Korean market was less optimistic, while the strong New Zealand housing market has benefited the timber and distribution businesses.
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