Forests gives its trees a $700m valuation chop

By PAULA OLIVER forestry writer

Fletcher Challenge Forests is to change the way it values its forest estate - a move which will shave $700 million from the previous valuation of $1.8 billion.

Forests chief executive Terry McFadgen said yesterday that the new valuation of $1.1 billion was market based.

Before the separation of Fletcher Challenge, the estate was valued on a historical cost basis.

Mr McFadgen said the change would bring Forests into line with an Australian accounting standard for regenerative assets such as plantation trees.

It would also give investors information that was more relevant.

Because of the way that Fletcher Challenge's consolidated accounts capitalised interest, they had valued the estate at $1.8 billion - $700 million more than the Forests division's valuation of the the estate. The change in accounting policy would not affect the bottom line.

Mr McFadgen said the company also planned to change its functional currency from US dollars to New Zealand dollars.

"Processing is now a much bigger part of our business," Mr McFadgen said, and the "true US dollar activities had diminished in significance."

It was now more appropriate to adopt NZ dollars as the currency of the company's accounts, he said.

Forests will change its US dollar borrowings to NZ dollars progressively, over the next 12 to 18 months.