Fletcher Forests'profit up to $81m

By PAULA OLIVER

Trouble-child Fletcher Forests has produced an improved $81 million profit, up from $55 million, and a sigh of relief from its parent company.

Crippled by debt, and by far the most difficult division involved in Fletcher Challenge's separation programme, Forests' increased profit comes from a strong local building sector and more emphasis on value-added products.

Sales revenue rose 14 per cent to $578 million, largely because Asia regained its feet, which lifted prices on global wood markets.

Chairman Roderick Deane emphasised growth in high-margin manufactured products, which now represent 53 per cent of sales.

"You need only to look back three years to 1997 when the corresponding sales figure was just 32 per cent to recognise that quite a shift has taken place. The product solutions strategy designed to counter the log commodity cycle has been highly effective."

New Zealand remains Forests' top market for manufactured products, but that could be overtaken by North America, where strong relationships have been established with DIY stores, and the successful Origin brand has been launched.

Acting chief executive Ian Boyd said the company would feel the effects of slowing in the local residential building market, where the outlook was not positive.

Record growth in residential building during the first half of this year had been followed by a sharp drop, he said. Forests was also feeling the effects of higher fuel prices in its harvesting and transportation.

Shareholders will not receive a dividend. Fletcher Forests shares closed 2c down at 84c.