Carter top of tree in Aust panel market

By LIBBY MIDDLEBROOK

Forestry company Carter Holt Harvey is splashing out $423 million to become Australia's largest panel and timber supplier.

It has bought five particleboard plants, a medium density fibreboard (MDF) facility and a sawmill from CSR, Australia's largest building and construction company.

Effective from April, the acquisitions will be financed from the $2.5 billion sale of Carter's 30 per cent stake in Compania de Petroleos de Chile (Copec).

Carter Holt will then have more than 70 per cent of the particleboard market in Australia.

"It's taken us further into Australia where we want to be. We've done it because we have an excellent track record in investing in Australia. It's a strong strategic move for us," said chief executive Chris Liddell.

While Mr Liddell declined to release any profitability figures related to the CSR businesses, he said the purchases fell in line with Carter's strategy to acquire companies that were performing and offered long-term growth opportunities.

He said Carter Holt, which had considered CSR before the December sale of Copec, had bought the businesses "at a reasonably significant discount" to the cost of building new mills.

CSR was at the top of its list in terms of potential Australian investments and Carter expected improved profitability from the CSR businesses within three years.

The sale to Carter Holt and further operations sold to Weyerhaeuser of the United States all but completes CSR's exit from the timber industry.

The acquisition takes Carter Holt's Australian MDF market share from 6 per cent to 34 per cent and its share of the timber market from 18 per cent to about 22 per cent. The particle board business, spread between Queensland, New South Wales and South Australia, produces more than 570,000 cu m of product a year.

Mr Liddell said the purchase did not affect an earlier joint-venture agreement between Australia's largest building materials company, Boral, and CSR to merge their Oberon-based sawmill operations.

Boral will fund a $30 million upgrade at Carter's new sawmill, while Carter contributes the existing facility along with a six-year log supply contract with the Australian Government.

Meanwhile, Credit Suisse First Boston analyst Andrew Mortimer said Carter Holt had purchased the CSR businesses as demand improved for MDF products because of strong Australian construction markets and the recovery of the Asian economy.

"The oversupply in the market appears to be reversing," he said.

Between 20 and 25 per cent of Carter's assets are now based over the Tasman.

Carter Holt's share price closed up 2c at $1.94.