Carter brushes off talk of forestry sales after $656m loss

By PAM GRAHAM

Carter Holt Harvey yesterday reported a $656 million annual loss after writing $822 million off the value of its forest estate and hosed down speculation of big capital returns and forest sales.

"I think [a forest sale] is unlikely," chief executive Peter Springford said.


"We will continue to reshape our portfolio so we can meet our objectives to improve our returns, particularly where there may be a higher value owner for some assets, but I want to make it clear that we have not made a decision to sell forests."

He said the company was highly unlikely to sell all of its forests because up to half their output fed its own mills.

Speculation about a possible sale had driven Carter Holt's share price to a 52-week high this week. The shares retreated 3.8 per cent to $2.02 yesterday.

Investors have been betting on a capital return from the tissue business sale, hoping it could sell for as much as $800 million.

Carter Holt's net debt is the lowest in 20 years and earnings cover interest costs six times.

One theory is that 50.5 per cent shareholder International Paper wants to take capital out while the New Zealand dollar is high.

Springford said there was no current pressure from International Paper for a return of capital.

Carter Holt's annual earnings before interest and tax were down 5 per cent at $315 million and would have been up 5 per cent but for last year's Kinleith strike.

In the 12 months, forests earned $92 million before interest and tax and wood products $87 million. Pulp and paper contributed $54 million, Tissue $52 million and packaging $30 million. The closure of the Tokoroa sawmill cost $17 million and there was $11 million of other redundancy costs. There was also a $7 million charge for the company's pension scheme.

The company's 2003 earnings did not exceed the cost of capital and have not done so since 1994/1995.


The company was confidently predicting cost savings and productivity gains would make up the $150 million it needed just to stand still because of the high New Zealand dollar when the Reserve Bank introduced a new hurdle by hiking interest rates.

The quarter point rise was "a bit scary and not what we were expecting" said Springford. It would hurt housing markets and further erode export competitiveness.

The biggest cost savings and productivity gains had been at the Tasman and Kinleith mills, in Australian packaging and in forest ownership.

Carter Holt expects to sell its tissue business by April. The option of an initial public offering was still running alongside trade sale talks.

A 3c a share final dividend without tax credits will be paid on February 26.