Carter Holt half-year net profit up

12.00pm

Forestry company Carter Holt Harvey today reported its June second half-year net profit rose 26 per cent to $92 million but its second quarter result fell by about the same proportion.

The company, half owned by United States giant International Paper, said its June quarter net profit of $41 million compared with $56 million a year ago was down 27 per cent.

Chief executive Peter Springford said the 82-day industrial dispute at its Kinleith pulp and paper mill and the time needed to restart production had hurt earnings for the June quarter.

The ebit (earnings before interest and tax) effect of the dispute was estimated at $28 million.

"The other main factors affecting the company in the second quarter were weaker export realisations and the flow on effects into domestic markets for logs and wood products.

"On the positive side the housing markets continue to be strong and Kinleith is back to full production."

Ebit operating earnings for the half year rose to $145 million from $143 million last year although June quarter ebit earnings fell by $24 million to $68 million. It was worst quarter result in five quarters.

Analysts had forecast second quarter net profits in a $40 million to $47 million and ebit estimates were between $65 million and $75 million.

The company said an unchanged, unimputed first half dividend of 3 cents per share would be paid on August 18 for those on the register on August 1.

Half-year net sales fell to $1.84 billion from $2.0 billion a year ago.

Mr Springford said the company had plans in place to ensure earnings stability.

A major productivity review was undertaken earlier in the year that examined revenue and cost opportunities as well as the use of capital.

"I'm confident that we can take the necessary steps to compensate for a sustained high New Zealand dollar next year," Mr Springford said.

The company said it may be appropriate to revise down the book value of its forests by nearly a third -- to $2 billion from $2.9 billion.

The forest revaluation would be completed in the fourth quarter.

The Forests division quarterly ebit fell to $22 million from $39 million a year ago.

Domestic pricing came under pressure as lumber exports to the US and Asia were diverted to the domestic market.

Export prices held up but receipts were down due to the higher NZ dollar and higher freight costs. The key China market was seen as continuing to grow significantly.

Pulp and Paper division ebit fell to $8 million from $11 million with the strike hitting that division by $23 million in the quarter.

Division chief Rhys Jones said the company had won improved workforce flexibility and production capability while making the mill more competitive. Kinleith was now operating at full capacity but prices were still bobbing along near the bottom of the cycle.

Quarterly ebit for the Wood Products and Packaging division fell to $17 million from $22 million.

Timber and plywood volumes were affected by weaker exports while the MDF (medium density fibreboard) export market was also under pressure. The Australian domestic market was strong.

The Packaging division ebit rose by $1 million to $10 million, which was "pleasing given the Kinleith strike". A successful apple and kiwifruit season helped the division.

Tissue division ebit fell by $1 million to $12 million.

Net debt for the group was steady at $1.15 billion while shareholders' equity rose to $5.01 billion from $4.97 billion.

CHH was fully hedged against the US dollar at US44.4c for fiscal 2003 and was 70 per cent hedged for 2004 at US46.6c and 27 per cent hedged for 2005 at US39.3c.

Carter Holt shares rose one cent to $1.66 in early trading today, having traded between $1.53 and $1.98 in the past 12 months.

Its stock was up less than 1 per cent in the second quarter, lagging a 6 per cent rise for parent IP and a near 8 per cent gain in the indicator US Philadelphia Forest & Paper index.

- NZPA