Agency ignores International Paper upturn

By PAM GRAHAM and AGENCIES

Carter Holt Harvey's $822 million forest valuation writedown is not helping majority owner International Paper shake Standard & Poor's dim view of its finances.

The ratings agency was unmoved by a fourth-quarter profit turnaround announced by the world's largest paper and lumber maker.

It kept IP's BBB credit rating, S&P's second-lowest investment grade, on negative outlook, which means it could be cut.

"The company continues to be negatively affected by restructuring and other charges, including timberland writedowns at majority-owned subsidiary Carter Holt Harvey," S&P said.

Carter Holt Harvey last week wrote the value of its forest estate, the nation's largest, to $2 billion from $2.9 billion, turning its bottom line red.

"S&P remains concerned about IP's ability to strengthen its financial profile to levels appropriate for the ratings," it said.

As a credit rating company S&P focuses on debt. It said IP's net debt of about US$13 billion, excluding capitalised leases, was little changed.

IP reported a fourth-quarter bottom line profit of US$48 million, a turnaround from a US$130 million loss last year, when the company incurred costs for claims for defective siding and roofing products.

S&P said the company's operating earnings declined from prior-year levels as cost improvements were insufficient to offset weak demand and pricing for most of its products as well as higher pension, wood and energy costs.

The company's earnings excluding some costs and gains, of 23USc a share exceeded analysts' expectations of 18USc a share.

IP shares rose 24USc to US$42.51 yesterday.

Carter Holt's balance sheet is strong and the company has the potential to make a capital return when it sells its tissue business.

IP has denied it is driving any return of capital to it.