Unclear outlook delays Carter Holt float

Wesfarmers is speculated to be preparing a bid for Carter Holt's 50 building supplies stores here. Photo / Brendon O'Hagan

Building products company puts $1 billion initial public offering on hold as it is unable to finalise forecasts

The delaying of Carter Holt Harvey's $1 billion sharemarket float, following forecasting challenges, is understandable given how dimly the market views companies that miss prospectus forecasts, says a fund manager.

The building products firm said yesterday market conditions had made the earnings outlook for its Woodproducts Australia business uncertain.

"The new [Carter Holt] board, in conjunction with the group's advisers, determined they were unable to finalise the forecasts in the IPO [initial public offering] document given the necessary level of confidence required as to the forecasts' accuracy and probability of being achieved," the company said.

"Accordingly, until these circumstances become clearer, the IPO of CHH has been put on hold."

No timeframe was given, but the Australian Financial Review reported that the float may not take place until after the August reporting season or even the December quarter.

Auckland-based Carter Holt was previously expected to register a prospectus for the IPO this month, with the float - likely to be the biggest New Zealand will see this year - to take place in July.

Carter Holt chief executive Prafull Kesha said the decision to delay had the full support of the firm's owner, Rank Group, the investment vehicle of New Zealand billionaire Graeme Hart.

Salt Funds Management managing director Paul Harrison said companies that failed to meet prospective financial information were not treated kindly by the market.

"Directors need to be pretty sure of the forecasts they are signing off against in the prospectus," Harrison said. "We have seen the likes of Orion Health [which floated last year] do without forecasts but the offshore investors don't like that."

The delay came amid speculation that ASX-listed conglomerate Wesfarmers, operator of the Bunnings Warehouse DIY chain in New Zealand, was preparing a bid for Carter Holt's 50 Carters building supplies stores in this country. Wesfarmers and Rank Group declined to comment.

If the sale of the Carters outlets went ahead, Carter Holt would be left with its Woodproducts businesses in New Zealand and Australia, whose brands include Pinex and Laserframe.

Carter Holt is understood to have revenue of about A$2 billion ($2.15 billion) and roughly 5000 staff.

Rank bought the company for $3.3 billion in 2006, de-listed it from the NZX and Australia's ASX and then divested assets including forests, farms and its pulp and paper division.

Rank has said it will retain a significant stake in Carter Holt after the float.

Carter Holt Harvey
• Revenue of about A$2 billion and roughly 5000 staff.

• Operates 50 Carters building supplies stores.

• Has four New Zealand milling sites in Tokoroa, Nelson, Kawerau and Whangarei, as well as nine frame and truss plants.

• About nine milling sites in Australia.

Wesfarmers speculation

Speculation that Australian conglomerate Wesfarmers may be going to take over the Carters branch of Carter Holt Harvey is being viewed as good news for the company and for consumers, according to retail commentators.

Wesfarmers, which owns and operates hardware store Bunnings, has traditionally had a smaller trade area market share of about 12 per cent, according to New Zealand Building Industry Federation chief executive Bruce Kohn. He said that with Carters market share at an estimated 18 per cent, the addition would make Bunnings a major player.

"It will boost their trade representation notably because they would have outlets around the country and it could even lift them as high as second to Placemakers at that point," Kohn said. "Again that's speculation, but I think it will tighten competition. It would certainly add to Bunnings' capability in the New Zealand market on the trade servicing side."

First Retail Group chief executive Chris Wilkinson said Bunnings was not strong in the trade sector, and if the acquisition went ahead it would move them into the sector in a significant way.

"With the growth in the trade sector at the moment in New Zealand this is a good strategic move. The market here is quite buoyant and it doesn't look like that is going to change any time soon."