Write-down hits Fletcher Forests

By Phil Boeyen, ShareChat Business News Editor

Wednesday 28th February 2001

As expected the write-down of its Central North Island Forestry Partnership has weighed heavily on the interim result from Fletcher Forests, with the company recording a loss of $498 million.

The loss for the six months to the end of December compares with a $15 million profit for the same period the previous year. Net unusual losses were $499 million, including a $529 million write-down of its investment in the Central North Island Forest Partnership.

FFS announced earlier this week that the Partnership was in receivership.

Net earnings before unusual items also fell on a comparative period basis, down from $4 million to $1 million.

On the upside for the embattled company is news that sales rose to $322 million from $282 million previously, and total revenue was $348 million - a record for a six-month period.

No dividend is being paid because the company says wood product prices within the wider Asian region are still below long-term levels, which is continuing to have a significant negative impact on cash flow.

CEO Terry McFadgen says Asian demand remains volatile and is currently too low to create upward pressure on prices.

"Therefore, it will be our ongoing efforts to grow the demand for environmentally certified Radiata pine products, in both existing and emerging markets, that will be the key to earnings."

Mr McFadgen says building activity in New Zealand is expected to remain low, especially in the residential sector, and there may be further flow-on impacts from the decline in Australian demand.

He says the US economy is also going through a slow down which could have some effect on the repair and remodeling sector, and key customers are reporting declining sales. However the company is not expecting any significant drop in demand.

Fletcher Challenge warned of the write-downs in the Central North Island Forestry Partnership late last month, and also said it had set aside $5 million to cover the costs of defending the claims of its partner, Chinese-owned Citic.

The two have been dueling over Citic's allegations that Fletcher Forests sold logs to its own company divisions at less-than-market prices.

Citic said this week it intends to pursue its legal challenge.

Comments from our readers

No comments yet