Guinness Peat profit hurt by downturn, Brierley says

Wednesday 7th January 2009

Guinness Peat Group's 2008 profit will be less than the investment company had anticipated after the worldwide economic downturn eroded earnings and reduced the value of its share portfolio.

The deterioration in the second half of the year may dent GPG's ability to make a capital return to shareholders in 2010 as the company flagged last year, when announcing that chairman Ron Brierley would retire. GPG's stock shed 4.8% to 99 cents today and fell 33% in the past 12 months.

"The board is still focused on returning value to shareholders in 2010 but this must obviously be qualified by market conditions that were not fully foreseen earlier in the year," Brierley said.

GPG, whose stock trades in New Zealand, Australia and the U.K., posted a first-half loss of 41 million pounds in August after writing down the value of its stock holdings. Its biggest investment is in threadmaker Coats, whose first-half profit tumbled on restructuring and impairment charges.

GPG has been forced to absorb losses from Capral Aluminium, the Australian metal processor whose stock has sunk about 80% in the past 12 months. It also holds stakes in Tower Australia, Tower (NZ) and Turners & Growers.

Brierley said 2008 has been "very unsatisfactory year" for GPG. "A number of portfolio writedowns have been necessary as a consequence of the global financial crisis although we believe many of these will ultimately recover as a more realistic reflection of intrinsic value," he said.

Four businesses in Australia - Australian Country Spinner, Green's General Foods, Gosford Quarry and Tafmo - were listed at nil market value compared to a combined book value of A$64.4 million, according to a valuation of GPG's investments released today.

As at December 22, the company had cash in the bank of NZ$817 million, an investment in Coats worth NZ$749 million and shares in the U.K., Australia, New Zealand and Singapore valued at NZ$877 million, giving GPG total assets of NZ$2.4 billion.

After capital notes, contingencies and creditors, net equity is NZ$1.89 billion, amounting to NZ$1.33 a share, it said.

By Jonathan Underhill

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