Tenon's leap to profit 'bang on'

Despite a dramatic swing into a $29 million profit from last year's $42 million dollar loss, wood processor Tenon's annual result contained few surprises.

Tenon said discontinued activities - which last year weighed on its bottom line to the tune of $64 million - had this year contributed $11 million to its net profit.

Goldman Sachs JB Were institutional adviser Humphrey Sherratt said Tenon's overall result was in line with guidance, as were its earnings from continuing operations.

"It was reasonably well signalled to the market. There shouldn't be any surprises."

Another analyst said the result was "bang on" expectations.

That was reflected in a relatively small move in its shares, which closed 3c lower at $4.20 last night.

Tenon ended the financial year having largely completed its transformation from a forest owner and saw miller to specialist wood products-maker selling to the United States market.

In the year to June 30 the company, formerly Fletcher Forests, sold its structural sawmills to rival Carter Holt Harvey for $171 million, completed the sale of most of its forests and returned $321 million in capital to shareholders.

With this done, "the company is now well positioned to grow its United States-focused distribution and manufacturing businesses", said chief executive John Dell.

New chief Mark Eglinton will be based at Tenon's Baltimore office from October and the company will report its results in US dollars for the 2006 financial year.

Tenon's total operating revenue, at $419 million, was up 37 per cent on last year. Most of the increase came from the first full year's contribution of its US distribution businesses Empire. But while Empire's revenue increased 25 per cent on a US dollar basis, the higher average exchange rate over the period reduced this 12 per cent in New Zealand dollars.

"The end-of-year results reflect good growth in our North American-based operations, largely offset by an unfavourable exchange rate as earnings were translated into New Zealand dollars," chairman Tony Gibbs said.

"[For] our New Zealand-based continuing export operations, the current operating environment continues to be difficult."

Gibbs said US lumber prices were expected to stay firm and if Tenon could expand the range of products it got from New Zealand it could increase its local earnings.

The company had sold two further forest parcels for $4.5 million since the end of the financial year, and the value of forests that remained were not material.