CAH December result disappoints

By Phil Boeyen, ShareChat Business News Editor

Wednesday 24th January 2001

Carter Holt Harvey (NZSE: CAH) has delivered a less than stunning third-quarter result with net earnings dropping to $42 million for the three months to the end of December 2000 compared with $89 million the previous year.

The December quarter earnings are also well below the September 2000 quarter result of $86 million.

CEO Chris Liddell admits the result is disappointing.

"Our performance in the December quarter has been impacted by the slow down in the Australian residential construction markets. This has affected demand for both wood products and logs."

Mr Liddell is also cautious about the outlook, suggesting that the adjustment taking place in the USA economy could create a difficult global trading environment going forward.

"The pulp markets in particular are slowing, with many mills taking downtime to reduce inventory levels," he says.

CAH's Kinleith Mill will take six days downtime at the end of January.

The company says since the September quarter earnings release the immediate outlook for most of its markets has deteriorated.

It says the US slowdown is impacting on Asian economies where demand in Asian export markets for pulp and linerboard has fallen from cyclical highs in the middle of the last year, while industry inventory levels have been steadily increasing.

Export log prices in Japan and Korea have also been weak although some increases may eventuate in the Northern Hemisphere spring.

CAH says while Australian and NZ construction markets, particularly for residential dwellings, appear to have bottomed, only a modest recovery is expected which may not occur until the second quarter of the year.

One bright spot for Carter Holt in the December quarter was earnings from its Tissue division, which the company says had the best quarterly earnings for the year.

Overall, results for the nine months to the end of December have been positive for CAH, with earnings up 50% to $218 million compared with the same nine months in 1999.

Nearly all divisions have improved earnings before interest and tax for the nine-month period apart from Distribution.

Income from associated companies for the first nine months also fell to $8 million for the nine-month period compared with $122 million the previous year, but the previous year's figure included income from Chilean assets which were sold at the end of 1999 for around $2.5 billion.

Despite the disappointing third quarter results the company remains placed to exceed last year's full year profit of $202 million.

Its full year result to the end of March 2001 will be the last for that period as the company is changing to a December 31 balance date.

CAH shares were down 4 cents to $1.58 in the first half hour of trading this morning.

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