CHH on a roll in Australia

By Simon Evans

Australian Financial Review

SYDNEY - The $700 million-plus toilet paper and tissue business operated in Australia by Carter Holt Harvey is set for renewed growth, driven by higher spending on key brands such as Sorbent and an increase in conversion capacity.

Carter Holt Tissue chief executive Mr Dennis Finn said the Australian business was a key growth engine for the wider Carter Holt group, and would concentrate on organic expansion as well as sizing up small acquisition opportunities.

Five months into its financial year, the Carter Holt Tissue business is performing ahead of targets, having delivered 15 per cent growth in earnings before interest and tax to the end of August.

Sales revenue for 1998-99 in the tissue business had reached $A670 million ($827 million) and the group was targeting about $A710 million for 1999-2000.

Carter Holt includes the tissue operations contribution with the wider pulp and paper division at Carter Holt and its performance has been overshadowed by the tough times experienced in pulp and paper.

Further evidence of the difficulties faced by the Carter Holt parent came last week when ratings agency Moody's cut its credit rating, citing its high dividend payout policy at a time when its operating performance had deteriorated because of weak global prices for paper and forest products.

Mr Finn declined to comment on the figures for earnings before interest and tax in the tissue business, but industry analysts believe it currently generates on that basis between $A75 million and $A90 million.

Carter Holt's Sorbent brand holds the number one position in the $A520 million toilet paper market in Australia, while its Libra brand of feminine hygiene products is number one in its sector.

The Libra brand is produced through the Sancella joint venture with the SCA group of Sweden.

Mr Finn said advertising spending on Sorbent was being ramped up by 10 to 15 per cent to help drive growth, with supply constraints having been addressed through more capital spending on high-technology equipment used to convert large rolls of paper into the finished product.