Evergreen posts 21pc profit rise

By ELLEN READ

Harvesting between 50 and 60 per cent more trees - albeit lower quality ones - helped Evergreen Forests overcome subdued log prices and post a 21 per cent rise in its first-half profit.

The plantation forest investor's interim profit before tax and unusual items for the six months ended December 31, rose to $4.27 million from $3.54 million in the previous corresponding period.

Chief executive Mark Bogle said the company deliberately targeted its lower-grade timber for harvesting during the first half of its financial year as prices for this were comparatively strong - or at least not as weak as other grades.

Despite lower production and lower profits expected in the second half, because of the high New Zealand dollar and continued lower log prices in the United States, Bogle said Evergreen expected a full-year operating profit on par with last year's $6.7 million.

Log prices are 20-25 per cent below the historic level and the sector is at the low point of its cycle, he said.

The longer-term outlook for the company was still very positive, he said, with increasing global demand and reducing supply as many forest companies move away from resources to concentrate on processing.

New Zealand conditions produced good-quality timber quickly and the market was well placed to supply Asia and the northwest of the United States, Bogle said.

Evergreen owns and has cutting rights to 21,000ha planted in radiata pine in Northland, South Auckland, the east coast, and the South Island's West Coast.

Shares in Evergreen closed unchanged yesterday at 57c.

Bogle said the company had forward cover in place for expected export receipts at an average of US44.25c for the next six months, providing some protection to the company's operating profile.

However, he also said that should pricing and currency trends continue to be unfavourable it would impact negatively on forest values.

Evergreen's forest estate is independently valued at the end of June each year.

The company also said that UBS Timber Investors has been appointed as the new manager of Xylem Fund I - which holds 43.33 per cent of Evergreen ordinary shares.

It understands that over the next three months UBS will review the fund's investment in Evergreen.