Price rises see CHH profits on increase

By Libby Middlebrook

Forestry giant Carter Holt Harvey has arrested a decline in profits for the first time in three years, thanks to rising product prices and increased demand from its major markets.

The Auckland-based company had after-tax profits of $56 million for the six months ended September 30, up 460 per cent on last year's $10 million.

Chief executive Chris Liddell said price increases for most products and volume improvements in Australia, New Zealand and Asia had contributed to the positive result. The company's performance improvement plan, Genesis, had added a further $170 million to the company's earnings during the past 18 months.

"Asia has really rebounded significantly from the crisis last year. Korea principally, but really all parts," he said.

"As we look forward in terms of market, Australia continues to be a very strong, important market for us. It represents almost 40 per cent of our sales now."

Carter Holt, which is half-owned by US company International Paper, also confirmed yesterday the construction of a $132 million, laminated veneer lumber mill at Marsden Pt, near Whangarei, that will create around 220 construction jobs and 110 full-time positions.

The group achieved operating earnings before interest and tax of $139 million for the six months ended September, up 51 per cent on the previous year's $92 million. Volume increases in nearly all of its divisions contributed to a rise in net sales to $1524 million from $1374 million in 1998.

Earnings per share for the six months were 3.2c, up from 0.6c last year, and an unchanged interim dividend of 3c will be paid.

Carter Holt's forestry division, which generated earnings before interest and tax (EBIT) of $55 million compared with $41 million last year, saw volume increases across all markets, thanks to the strengthening Asian economy, but prices remained flat. The strongest volume demand for logs came from Korea.

The wood product division's EBIT of $25 million was unchanged compared to the same six-month period last year, while sales grew to $420 million from $374 million, on higher prices.

Carter Holt, which is planning further price increases for all timber products in New Zealand and Australia in December, said a buoyant construction industry and stronger demand from all major markets had led to the rise in sales.

"New Zealand has clearly performed a lot better this year than it did last year. Housing has been a lot stronger and that's fed through to most of our businesses."

Pulp, paper and tissue were among the company's rising stars with EBIT of $5 million for the first six months of the year. Production at Kinleith was up 26 per cent following the plant's $300 million rebuild.

Packaging was the only division to produce a gloomy result, with EBIT losses of $3 million compared with an EBIT contribution of $11 million last year.

Mr Liddell said the July to September quarter was traditionally the slowest in packaging, but restructuring costs and the inclusion in May of the Australian corrugated box business, which had been trading at a loss, had contributed to the poor result.

Meanwhile, Carter Holt's distribution business improved its performance, recording EBIT of $1 million compared with EBIT losses of $5 million last year. Sales were $256 million compared with $234 million.

The company's retail arm, Carters, achieved a $3 million improvement in earnings compared to last year.

Carter Holt's 50 per cent indirect shareholding in Chile-based Company de Petroleos de Chile, Copec, produced earnings of $60 million, while other associated companies generated $7 million. The group received $42 million from associated companies in the same period last year.

Mr Liddell said the company would continue to reduce operating costs across all its divisions through the Genesis programme and concentrate on increasing its Australian market through laminated veneer lumber products.

Carter Holt Harvey's net earnings peaked in 1996 at $453 million.