Challenge of $64m for Tenon

By ELLEN READ and NZPA

Tenon has posed a $64 million question - well more of a challenge really.

That's the wood products company's target for pre-tax profit this financial year, one it expects to reach but that would be hard to beat.

This is despite yesterday booking a $42 million loss for the 12 months to June 30.

The former Fletcher Challenge Forests said that loss was 85 per cent better than the previous year's net loss of $271 million - but that figure included a substantial writedown on the value of its forest assets.

The result included a $74 million loss from discontinued activities, reorganisation costs, and forest revaluation, as well as unusual items of $2 million relating to Rubicon's partial takeover of the company.

Before unusual items, Tenon reported a net profit of $34 million, up $1 million on the year before.

No dividend will be paid.

Tenon's operating earnings from continuing activities, before unusual items, of $50 million, compared with $49 million the previous year.

The company returned capital of $349 million to shareholders during the year, following the sale of its forestry assets to Kiwi Forests Group. Another capital return of up to $320 million is planned for later this year.

Tenon, which is 50.01 per cent owned by Rubicon, said there had been a strong recovery in the second half of the year in sales prices and volumes to the United States.

The company said the local residential housing market activity would remain strong in the short term - offsetting any slowdown in the second half of the year.

North American timber prices will stay high, with tight supply from New Zealand and South American suppliers unlikely to ease soon.

Chairman Tony Gibbs said Tenon was assessing opportunities to expand the Appearance Consumer Solutions business in North America and Europe. "While some markets, such as Europe, will clearly take time to assess and develop, we believe potential for attractive growth may exist under wider Appearance product offerings."

This fits with earlier word from Tenon that it was looking to add windows, doors and furniture to its clearwood and mouldings offerings in North America and expand in Europe.

No mention was made about speculation the company will be broken up, with Carter Holt Harvey buying the sawmills making timber-framing and other structural products for the building industry.

Tenon has sold its forests, leaving sawmills, wood-moulding plants, a distribution network in North America and a furniture joint venture in Europe.