Carters outgrows NZ nest

By CHRIS DANIELS

Forestry giant Carter Holt Harvey is increasingly looking across the Tasman as it strives for better profits from its yearly sales of $3.15 billion.

Announcing net profit of $25 million for the December quarter yesterday, the second-biggest company on the Stock Exchange also revealed it was discussing a full compliance listing on the Australian Stock Exchange.

Company chief executive Chris Liddell stressed that Carter Holt was not planning to move its corporate office to Australia or change the status of its listing on the NZSE.

Carter Holt had heritage in New Zealand and would be staying here.

The $25 million profit is up on the previous quarter's result of $15 million. The company reported $6 million in net profit for the nine months to last December - compared with $218 million for the same period the previous year.

The poor result came despite a year of record sales worth $3.154 billion, up from $2.854 billion the year before.

A dividend of 3c a share will be paid on February 25, compared with 7c a share last year. No dividend was paid for the six months to September.

All major divisions in the company - forests, wood products, pulp and paper, packaging and distribution - had increased earnings in the past year.

Mr Liddell said growth in Australia was becoming an increasingly important feature of the business, with the proportion of sales in that country now the majority.

"I see the next few years as being very much Australia - but if you go out five to 10 years then obviously we're getting much more excited about what's happening in Asia."

Carter Holt has a foreign exempt listing on the ASX, meaning it does not have to comply with the more rigorous disclosure regime in Australia.

The ASX is trying to end this practice, preferring companies to instead get full listing on its exchange - which is another incentive for Carter Holt.

After its recent acquisitions across the Tasman, Carter Holt now has assets worth $2.2 billion in Australia, employs just under 4000 people and has two chief operating officers based in Melbourne.

Closer to home, Mr Liddell said Carter Holt was faced with growing sales volumes but low earnings, so prices had to improve to get better profits.



The international price of pulp was critical to Carter Holt's future earnings, he said. The purchase of the Tasman pulp plant last year effectively doubled the company's exposure to the pulp market.

Every $US1 ($2.33) movement in the price of pulp meant an earnings shift of $100 million.

"Over the next little while it's hard to see it getting significantly better. Most see recovery coming through in the second part of the year."

Mr Liddell said pulp prices were tied closely to the world economic situation. The Tasman Pulp mill at Kawerau, bought from Norske Skog last year for $311 million, had been returning more than the cost of its capital, despite the current low world pulp prices.

"It's been an extremely good acquisition in that sense. We essentially bought it for roughly half the book value of Kinleith, which is roughly similar."

Anyone looking for good news at Carter Holt in the next few months were more likely to be pleased by changes in the world pulp price than increases elsewhere in the business.

Mr Liddell said the company, which had in the past gone down the path of innovation and growth, would now "pull harder on the costs lever" in the coming year.

Around 900 senior employees had had their salaries frozen for the coming year, he said.

Working capital had been reduced by $100 million. Other savings would be made in areas such as IT, travel, consultancy and a freeze on new hiring.