Tenon forecasts $32m June year profit

12.30pm

Tenon Ltd, formally Fletcher Forests, today upped its June year profit forecast from continuing operations to $32 million from an earlier projection of $21 million.

The net result after accounting for the discontinued forest segment trading result and the loss on sale of the forest assets is expected to be a net loss of approximately $33 million.

The profit from continuing operations would include $7 million in foreign exchange gains.

Operating cash flow is also expected to exceed projection although not by the same magnitude as business growth is resulting in increased working capital requirements, the company told the stock exchange.

Tenon, which has sold the cutting rights to its forests, said the main reason for the profit improvement was the price recovery of one of the company's major exports to the United States. Moulding and better lumber has moved off the cyclical lows reached in June 2003.

"Tenon now projects earnings before interest, tax, depreciation and amortisation (ebitda) for the continuing operations to be in the range of $58-$60 million, inclusive of the attributed realised foreign exchange gains of approximately $7 million announced last month, compared to the $45 million projection in the (earlier) explanatory memorandum."

Chief executive John Dell said "notwithstanding the higher New Zealand dollar, the continuing business of Tenon has performed above expectation during the first quarter of the 2004 calendar year.

He said the price for moulding and better lumber was now US$1,240 ($1901) per thousand board feet, which was significantly higher than the December 2003 level of US$1,050 per thousand board feet assumed when Tenon issued an explanatory memorandum with its forest cutting rights sale.

"This price increase, together with the continuing sound performance from the company's separate United States distribution businesses, has more than offset the impact of the stronger New Zealand dollar," Mr Dell said.

The structural consumer solutions business that primarily services New Zealand was continuing to enjoy robust demand.

"However, as a result of the high New Zealand dollar, competition has been refocused into the New Zealand market, which is likely to reduce earnings for this business segment to slightly below the projection for the period to 30 June 2004."

Tenon shares were up 2c at $179 today.

- NZPA