Fletcher rules out sale of assets

By PAM GRAHAM

Fletcher Challenge Forests yesterday stuck to a $46 million profit forecast for its processing and distribution businesses and ruled out their sale.

The assets left over after the company exits forests were not for sale, chief executive John Dell said.

"We've not had any offers, and nor are we soliciting any offers," he said.

Fletcher reported an interim loss of $26 million after a $38 million after-tax writedown on its forests and $35 million of costs associated with their sale.

The company is sticking to its $46 million 2004 operating earnings forecast for the business it will be without trees, saying rises in US mouldings prices are offsetting some of the impact of the high New Zealand dollar.

The 12USc rise in the currency from a year ago cut interim earnings by $12 million but $7 million was carved back by hedging arrangements. The value of the so-called residual assets - mills, distribution companies in North America and a new furniture deal in Europe - is being exposed by the forest sale being put to a shareholder vote next Friday.

The company will be a more attractive takeover target without its forests and decisions by 19.9 per cent shareholder Rubicon will be influential, documents sent to shareholders say.

The idea that bankers are pitching a bid for Fletchers to Carter Holt Harvey has been doing the rounds for some time, as has the counter- argument that there are unattractive exposures in historical contracts no one would want.

Carter Holt has said it would be very interested at looking at Fletcher's processing businesses but understood they were not for sale. Dell confirmed that yesterday and said there had been no talks with Carter Holt.

Fletcher's forest business made a small operating loss in the sixth months to December 31, while the processing and distribution business made a $19 million profit.

Arrangements with Danish furniture maker Zenia House are expected to be formalised soon.

Zenia last month launched a New Zealand-inspired range of furniture at one of the world's biggest furniture fairs. About 100 showrooms had expressed an interest in carrying the range, Dell said.

Fletcher is selling its forests to a consortium of Auckland property investors and North American pension funds.

But it is having to remarket the $165 million Tarawera forest right after Kiwi Forest Group failed to confirm finance on that part of the sale.

Dell said the company was still talking to both Kiwi Forests and the Campbell Group of the US about Tarawera.

"We're satisfied that Kiwi endeavoured to secure funding and were unable to.

"Tarawera is a very high quality asset. We believe we will be able to remarket it," he said.

It could not be marketed to anyone other than Kiwi and Campbell under the controversial $17 million break fee arrangement with Campbell.

That would end with a final payment to Campbell if the forest sale goes through next Friday.

It is still subject to Overseas Investment Commission approval and a tax ruling.