Power flicks Carter Holt Harvey switch

By PAM GRAHAM

Carter Holt Harvey, the country's second-largest listed company, is holding back on new investment until energy supply becomes more certain.

After the company's annual meeting in Auckland yesterday, chief executive Peter Springford said: "Our board told me yesterday [Tuesday] that for any energy intensive investments that you have on your books you'd better reconsider until you have some answers on the energy crisis.

"We are holding back on one particular mill," he said, without saying which one (the company has been looking at upgrading its cartonboard mill in Whakatane).

Spikes in electricity prices affecting industrial production were one of many challenges the more than 100-year-old company listed to a full room of shareholders at the two-hour meeting, which became an extraordinary forum for business leaders, shareholders and workers.

At the meeting chairman Sir Wilson Whineray farewelled the company he has spent all his working life with, and small shareholder advocate Max Gunn challenged - and extracted promises from - incoming chairman John Maasland. Striking Kinleith workers and management also had their say without providing much work for the circling security guards.

Sir Wilson, a former All Black captain, observed at one point that "old front row forwards like to keep things simple" and took a mighty stand on Kinleith where pulp and paper production workers have been striking for eight weeks.

"Take my advice. This is my last meeting and as I'm sitting on my deck chair drinking beer and catching fish I'd like to read that you guys get back together and go in with a view of settling it.

"Give a bit each way. Settle it. Because with our prices going the way they are and overseas markets, which I believe are getting very much harder, it is not good if it is not settled."

He won the applause of the forum that later paid tribute to his 34 years of service, the last nine of which were as chairman of the board.

The company earned a bottom-line profit of $137 million last year.

Springford said earnings before interest and tax of $333 million had to rise to $650 million before the company would be earning its cost of capital.

Pulp prices at US$450 a tonne were below the long run average of US$600, and the US$800 to $900 of a decade ago. Every $50 a tonne price increase boosts earnings before interest and tax by about $60 million.

The company focuses on costs because it can control them. In the last decade factors it could not control - such as the 1987 share market crash, the Desert Storm campaign, the Asian financial crisis, terrorist attacks in New York and Sars - had affected the world it exported to, Sir Wilson said.

That all may be true, but Gunn, the 88-year-old who last attended a Carter Holt meeting in 2000 and "didn't expect to still be here for this one", asked why 697 staff now earned more than $100,000 compared with 499 in 2000.

He told management to get round the table with the Kinleith workers and both take a pay cut. "The people who have suffered the most are small shareholders."

The way Tokoroa workers talked about management "was so different from a firm like Fisher & Paykel where everybody was so proud that they worked for someone like Maurice Paykel."

Sir Wilson invited comment: "While we are on Tokoroa do some of you guys want to raise something and keep on that topic for a moment?"

They did.

"Obviously I'm from Tokoroa," said Kim Wright, a Kinleith worker and shareholder. He said workers had given way on some issues and were concerned about safety.

"I know some of you think we are well paid and I would agree with you. I'm sure that a lot of people in Carter Holt are well paid as well."

Another worker, who praised Sir Wilson's rugby prowess, said: "We are a world class workforce.

"We deliver to you what you demand of us.

"But sometimes those demands, in our opinion, get right over the line".

"Can I just leave you with this?" said Sir Wilson. "I don't think all these issues are about dollars, it's about attitudes to some extent."

He also noted that as he stood up as chairman for the last time he had proxies for 70 per cent of the shares ensuring that any vote would pass. But he paid tribute to both small shareholders and 50.5 per cent shareholder International Paper.

IP had provided financial stability, market information and technical support. "Never has one item come to the board that is in the interest of the company that these guys have not supported, Sir Wilson said.

CHH's challenges

* Ongoing strike at Kinleith

* Proposed labour market reforms

* Fluctuating global commodity prices

* Rising New Zealand and Australian dollars

* Relatively low returns from forest and pulp businesses

* Rising electricity prices

* Resource Management Act

* Lack of investment in rail infrastructure