Kawerau mill set to earn $5m more with upgrade

As the sale of Kawerau's big sawmill looms, investment company Rubicon has disclosed it will earn $5 million more a year once new equipment is installed.

The Kawerau sawmill is being sold by owner Tenon in a job lot with the Rainbow Mountain sawmill, the Mt Maunganui Plywood mill, the Kawerau remanufacturing plant and the Ramsey Roundwood business.

Carter Holt Harvey is thought to be competing with a number of private equity firms ahead of a deadline in the second week of December.

Grant Samuel valued the mills that comprise Tenon's structural grade business at between $123 million and $144 million in May. The earnings from the upgrade of the Kawerau sawmill would increase that valuation.

Rubicon said the increased earnings would result from an $11 million upgrade of the front end processing system at the mill.

The upgrade is due to be commissioned in December and January. It allows the mill to process larger diameter logs and increase the rate of conversion from log to sawn lumber. Kiln capacity has also been increased at Rainbow Mountain.

Rubicon increased its holding in Tenon to 50.01 per cent from 19.9 per cent in June.

Yesterday, it reported a $9 million loss in the six months to September from a $1.1 million profit a year ago as losses from Tenon's forest sale and the costs from debt and the partial takeover washed through its accounts.

It only consolidated earnings from Tenon reflecting its 50.01 per cent ownership for one month of the six-month period.

Rubicon paid $1.95 a share to move to control of Tenon and the shares closed yesterday down one cent to $2.22.