Drastic fall in Rubicon profit 'irrelevant'

Forestry and biotechnology company Rubicon has announced a first-half profit down 88 per cent to $1.08 million.

Rubicon, an offshoot after the split-up of the Fletcher Challenge industrial conglomerate, said the previous profit of $9.4 million had included one-off gains of $7.5 million.

The company used $6.2 million of cash reserves in the period to invest in existing activities, the majority relating to 31.7 per cent-owned ArborGen.

Shares in Rubicon closed up 2c to a year-high of 77c ahead of the news. One analyst said the market would be unperturbed because of the artificial profit last year and the company's solid net assets.

Rubicon owns 19.9 per cent of Fletcher Challenge Forests, and included $5.54 million of Fletcher's profits in its accounts.

Macquarie Equities NZ investment director Arthur Lim said that with investment companies, "the profit number is to a great extent irrelevant".

"The market looks much more closely at the net asset value behind the company and that tends to be the key driver of the share price."

Rubicon values its net assets at about 89c a share.

Lim said investors were aware that the value of Rubicon's Fletcher Forests shares would soon be realised. Rubicon itself said that the sale of the Fletcher Forest estate would probably not occur until the first quarter next year.

Fletcher Forests, New Zealand's second-largest timber company, has been negotiating with the Kiwi Forests Group over the sale of Fletcher's entire 100,000ha forest estate, and the sale had been expected to be settled by year-end.

Kiwi has lodged an all-cash bid of $725 million for the mainly pinus radiata forests in the central North Island, trumping an earlier offer by US-based Campbell Group.

Fletcher Forests will pay its shareholders $558 million from the sale proceeds, and concentrate on timber processing and marketing.

In October the company said it would seek a ruling from the High Court on the level of shareholder approval needed to approve the sale.

Shares in Fletcher Forests last traded a cent higher at $1.31.

- NZPA