Mixed response to unity call in forestry industry

By PAM GRAHAM

A call for a dairy industry-style consolidation of forestry from outgoing Fletcher Forests chief executive Terry McFadgen drew condemnation and praise yesterday, underlying his central point about the lack of a unified vision.

Companies such as Carter Holt Harvey and Fletchers had to get together more and even reorganise their assets, and the industry had to stop fiddling around the edges and come up with a top-down plan, he said.

As he predicted in his speech to the Pine Manufacturers Association, some people gagged at the ideas.

A socialist plan from poorly performing players was not needed, said Timber Industry Federation executive director Wayne Coffey.

Guinness Peat Group director Tony Gibbs said McFadgen's view was sensible because "three people trying to sell wood to the Chinese is stupid".

Andrew Little, general secretary of the EPMU, which represents forestry workers, said McFadgen's call was a radical statement and a step in the right direction.

Any industry plan had to ensure there was skilled labour.

David Stanley, head of research at Macquarie Equities, said: "What we have is a very, very large industry that currently has a lot of potential that is generating woeful returns."

Carter Holt and Fletcher Forests were starting to work together on some issues, but they could do a lot more.

"I think it's about trying to think outside the square.

"At the moment you have two highly vertically integrated businesses and maybe they could be more horizontally integrated."

If the Chinese investment company Citic bought the Central North Island Forest consolidation would happen "in a different way and the dynamics of the industry would be quite different".

The forests are still for sale after a plan for Fletcher Forests and Citic's Hong Kong associate to buy them failed to gain shareholder approval in August.

GPG is now bidding for control of Fletcher Forests' shareholder Rubicon to gain influence on Fletcher Forests, though it has not said exactly what its plan for the industry is.

"We believe there should be a co-ordinated attempt to put some of these large-scale forestry assets together so that we can have a co-ordinated sales attempt for New Zealand timber products," GPG's Gibbs said from Paris.

He returns to New Zealand tomorrow.

"I'm not against offshore foreign investment but I'm completely against a foreign sovereign Government buying New Zealand forests."

The Timber Industry Federation's Coffey said McFadgen's call was embarrassing because the sawmilling industry he represented was buoyant and optimistic.

"People should be very quiet before they start blaming the industry for their problems."

Macquarie's Stanley said efficient milling companies focused on niche markets were earning good returns, while commodity-grade millers were not.

The issue was about processing the large forest coming on stream.

Of the industry as a whole, he said: "It's a commodity business and there was a general expectation that prices were going to go up and what they have done in real terms is go down over the last few years."

Carter Holt Harvey chief executive Chris Liddell was unavailable for comment yesterday.

The company reports its nine-month result tomorrow.

McFadgen said yesterday that the issue was not about Fletchers and Carters just getting together.

"It's about having a total industry structure which avoids excessive fragmentation and enables the industry to build some decent marketing and distribution positions offshore."