Doomed Waipa claws back

By PAM GRAHAM

Waipa sawmill is considering expansion options a year after its future was in question.

Phil Verry, the man who bought the mill from receivers a year ago, said the mill was "cranking on pretty well" now that it was no longer managed by Fletcher Challenge Forests, a big corporate.

"It was used as a utility mill to serve the wider corporate objectives of the previous managers," he said.

"We're now running the place to optimise its business performance for itself."

Waipa, one of Rotorua's biggest employers, was a pioneer of wood processing in the central North Island and is now providing an insight into the future.

Many forests in the central North Island have been sold to US funds that buy trees, not mills. This has disconnected wood supply from mills, an area of tension in the industry.

Waipa has passed from state ownership to the Central North Island Forest Partnership (a joint venture between Fletcher Challenge and China's Citic), to receivership and on to Verry.

It is no longer managed with Fletcher Challenge Forests' other processing businesses. Verry argues this is a good thing.

And now other mills in the Fletcher Challenge group that process structural-grade timber are for sale.

Tenon, the renamed Fletcher Challenge Forests, is keeping only its appearance-grade timber business after selling the forests.

Verry said Waipa had a 10-year wood supply agreement with Kaingaroa Timberland, the company that manages the forests bought by Harvard University's endowment fund.

Running a large sawmill was tough and it had been a challenging year.

Big mills must export part of their output because of the small domestic market, which means competing with the best in the world, marketing internationally and weathering changes in freight and exchange rates.

Industry observers said Waipa had modern equipment but buyers found it difficult to value the extent of any liability for contaminated land.

Verry has taken on the mill at a time when the exchange rate and freight rates are high, but he says it is profitable.

The mill has been selling to the domestic, Asian, Australian and Pacific markets and is assessing future demand in the building market before committing to new investment.

"We're looking to become more aggressive," Verry said.

"We could increase production without too much sweat if we chose to."

He is also waiting to see what happens to Tenon's mills, along with everyone else in the industry.

If Carter Holt Harvey buys them, it will be a bigger force in the central North Island where it owns the Kinleith forest and has large pulp-and-paper assets.

"We have a good working relationship with Carter Holt,"' said Philip Langston of Kaingaroa Timberland.

But he said a Carter Holt purchase of the Tenon mills could crowd out other competition.

The new forest owners in the central North Island are seen as keen to support diversity in processors, rather than face off with a larger Carter Holt. They have supported Waipa.