Brokers pick Carter Holt to post $660m loss after write-down

1.45pm


Forestry products company Carter Holt Harvey (CHH) is likely to post a net loss after tax of $668 million for last year, says broking firm Forsyth Barr.

CHH is due to release its result for the year ended December 31 on Thursday and the market is rife with speculation on what the figures will be.

Forsyth Barr analyst John Cairns said CHH would report the net loss after a $900 million write-down in the value of its forest estate.

Restructuring costs related to company's Tokoroa sawmill would also contribute to the loss, he said in a statement.

He picked the result would come from gross sales of $4.3 billion, and after earnings before interest and tax (ebit) of $332 million.

"We are forecasting a steady final dividend of three cents with nil imputation credits," he said, adding that he expected the full-year dividend to be six cents.

Forsyth Barr also forecast the three months to December last year would close with a net loss of $834 million, also pulled lower by the write-down and after gross sales of $1.1 billion.

Ebit for the three months ended December 31 would be $98 million, Mr Cairns said.

For the December year, CHH's wood products division was likely to make the greatest contribution to sales, generating $1.7 billion.

"Wood products' operating performance will have benefited from the withdrawal from the export clear-wood market and a small improvement in the US dollar export price for commodity grade MDF (medium density fibreboard)," he said.

The pulp and paper division was likely to post sales of $691 million, thanks to strong prices for pulp and liner-board during the year.

The lower cost structure at the Kinleith Mill near Tokoroa would also help. In October, CHH said an 82-day strike at the mill had cost the company about $25 million.

CHH's forest unit would contribute $538 million, the tissue business $807 million, and packaging division $521 million.

Meanwhile, Macquarie Equities NZ expected CHH to post a full year ebit of $319 million on total revenue of $3.98 billion.

ABN Amro Craigs broker Dennis Lee forecast CHH to return an ebit of $90 million for the fourth quarter and $330 million for the full year, the latter on revenue of $4.04 billion.

"As far as the reported profit is concerned, it is obviously quite hard to forecast given that the company is going to write down the assets by $900 million," Mr Lee told NZPA today.

"The issue is whether they're going to write down the $900 million or more."

He expected the full-year dividend to be seven cents per share.

Another issue affecting CHH's bottom line would be the soaring New Zealand dollar, which had appreciated more than 25 per cent against the US dollar since January 2003.

At 12pm, the kiwi was fetching US66.85 cents.

In other news, CHH was in the throes of selling off its paper tissue unit and had flagged the possible sale of its 330,000ha forest estate.

The market has been speculating about the market price for the tissue business, which has a book value of $2.9 billion and carries the brands Sorbent, Purex and Libra.

CHH has indicated it will not sell the forests until the tissue business has been disposed of.

Any capital return by CHH would depend on the sale of those assets, Mr Lee said.

At midday, CHH shares were up four cents at $2.15, having traded between $1.57 and $2.16 this year.

- NZPA