Asian demand drives Carter Holt rebound

By CHRIS DANIELS forestry writer

A surge in sales to China, higher world log prices and continued cost cutting have delivered Carter Holt Harvey a solid $73 million for the six months to June 30, compared with a loss of $15 million for the same period last year.

The profit jump came in part from a 7 per cent rise in revenue to $2.023 billion from $1.89 billion last year.

A dividend of 3c a share, without tax credits, will be paid to shareholders on August 19.

Touting a strong balance sheet, with greatly reduced debt and capital expenditure, the Carter Holt result exceeded many expectations by reporting solid growth in all its business divisions apart from pulp and paper.

The Forests division reported earnings $35 million higher than for the same period last year, selling 660,000 tonnes of logs, bringing in pre-tax earnings of $63 million.

Log prices for high-grade Japan logs and lower-quality wood for the Korean market were both higher than a year ago.

Earnings before interest and tax from the Wood Products division were $33 million, a strong turnaround from a $2 million dollar loss in the same six months last year.

Chief executive Chris Liddell said this good result came from strong markets in New Zealand and Australia, with better sales volumes and prices.

The Pulp and Paper division was the only part of the Carter empire to have had a reversal in fortune over the past six months. Earnings before interest and tax dropped from $26 million to $10 million.

Packaging and Tissue divisions both earned more money in the six months to June 30 than in the same period last year.

Liddell said future prospects were balanced. Some divisions were looking at stable sales while others, such as wood products, might decline.

He released figures showing growth in sales to China of more than 350 per cent and emphasised how important the growing Asian market was for the long-term future of the company.

"Asia is crucial. Australia, in the short to medium term, is the real engine of our growth. It has been over the last couple of years.

"If we get the same sort of market position in Australia as we have in New Zealand, that'll drive a lot of growth. But when we look at the size of the company, then Asia has got to be critical, medium to long term."

Liddell said the idea was to focus the company's productive capacity in New Zealand and Australia. He did not see growth through either buying or building facilities in Asia.

Asia as a market was much more stable now than it had been in the past, in part due to the emergence of a large Chinese domestic market.

Looking at the company's balance sheet, with a drop in interest bearing debt of $420 million from a year ago, Liddell said a focus on reducing capital expenditure had made a big difference.

"When you try and get to the stage of promoting an owner-operator concept in the company, people just find smarter ways of spending money."

Liddell said he had no doubt that a new, more disciplined approach to spending was part of a change in behaviour that he saw occurring throughout the company.