KEY POINTS:
Timberlands West Coast (TWC) is meeting almost all of its contracted volumes to West Coast sawmills for pruned logs, but it is importing half from forests elsewhere, says chairman Ross Black.
The company was meeting all its contracted volumes for lower grade timber, he said.
The future of the state-owned enterprise is under review following an $8.6 million after-tax loss last year, reflecting a downgrade in the value of Timberlands' forests.
TWC employs 18 full-time staff and provides about 120 contracting jobs on the West Coast. It supplies logs to about seven West Coast sawmills which employ around 400.
Mr Black said TWC's forests were supplying only half the demand for the pruned logs on which four West Coast sawmills relied.
However, the company was importing logs from forests in the upper South Island to fill the gap, and backloading trucks with lower grade logs. He acknowledged the imports reduced TWC's profit.
"But the critical thing is to make sure those mills get the timber they need although the scale of our business has reduced, because we don't make money on the stuff we procure, but we don't lose money either."
Mr Black said TWC would not make a profit for the foreseeable future. Its problems coincided with record currency and record uncertainty in international forestry prices.
"Certainly, for the next five years I see very little opportunity for Timberlands making a profit or a return on their investment. We're not going to lose a lot of money, and I think that's important."
He said Timberlands was "soundly and confidently financed for the foreseeable future".
It was confident its share-holding ministers would come up with a longer-term structural solution.
He confirmed TWC's projected yields had more than halved from up to 350,000 cubic metres a year to between 140,000 and 150,000 cubic metres. An independent forestry company had begun a stocktake of the forests.
He attributed the incorrect projections to mistakes made by planners after the Government stopped native logging in the West Coast in 2002 and set up Timberlands as a radiata forester.
"Like most New Zealand forests it appears, with the benefit of hindsight, the harvest yields have been over-optimistically anticipated.
"It's very clear from the weight of evidence that all involved genuinely believed that volume was there."
He said TWC's current problems went back to the old Forest Service.
"There were no trees planted for a few years and there was no pruning done. Obviously the Forest Service had a funding issue and they didn't plant and they didn't prune...
"There was variable tending and we are harvesting forests that clearly are not up to the quality they were perceived to be."
Inaccurate predictions of tree growth and wind throw had worsened yield predictions.
Timberlands had discovered radiata grew faster on the West Coast than the East Coast for the first decade of a tree's life, then soil fertility and the West Coast climate slowed growth.
"That's never been understood until relatively recent times That's an issue that hadn't been factored in."
Initial predictions of wind loss had been "optimistic and wrong".
West Coast forests had suffered some "catastrophic losses" in the last four or five years.
"Whole areas of those flat lands have been totally devastated, not a tree left standing."
TWC had tried to recover the best logs, but trees attained their best value in the last few years of their life.
"When you are harvesting trees that have been blown over at 15 to 20 years of age, your harvest costs are high and the recovery is not great It's a marginal exercise as to whether the benefits from harvesting cover your costs."
TWC had been just as hard hit by attritional wind throw.
"The odd tree blows over, and once the tree on the outer armouring of the forest blows it can go back into the forest like a cancer."
The West Coast was especially susceptible because TWC forests were spread over a thin strip, 350km long, Mr Black said.
- NZPA
