Carter boss hopeful despite flat results

By Mark Reynolds

Forestry firm Carter Holt Harvey recorded another quarter of shabby earnings, but the company's new chief executive sees some signs of future improvement.

Chris Liddell, who took over as chief executive two months ago, said Carter Holt expects business conditions to pick up over the remainder of the current financial year. "I think our bias now is towards growth rather than contraction," he said, adding that the company's market share had stabilised in most of its operating areas.

The encouraging comments came after the company reported a sluggish after-tax profit of $13 million for the three months to the end of June. That was only marginally up from $12 million a year earlier. Shareholder earnings were flat at 0.7c a share, while the return on shareholders' funds for the quarter was 0.3 per cent.

The results continue to be adversely affected by laggard worldwide commodity prices, and the snail-paced growth in many of the markets in which the company operates. That is especially so in Asia, where Carter Holt exports its forestry products. Packaging has been hit by a double whammy of slow export growth for the Australasian businesses it supplies, and increased competition in New Zealand.

"It's still pretty tough to be honest," Mr Liddell said. "We have overcapacity in the market that continues to push prices down, but we would like to think the pricing levels we are experiencing now are at the bottom of the cycle. Prices now are really getting down to levels that are not much above cash cost for some of our competitors, so it is hard to see a situation where they could go much lower."

The company's share of the New Zealand box market has stabilised above 40 per cent, and a newly-acquired operation in Australia is expected to make a positive contribution to earnings in the next financial year.

In its log business, the company is seeing some price increases in Korea, with volumes recovering. There are also some new markets opening up in places like the United Arab Emirates and China. That comes on the back of a 5 per cent rise in log prices in New Zealand and rises expected elsewhere.

Pulp and paper earnings slipped, mainly due to continued hassles with the upgrade of the Kinleith mill. Carter Holt's paper distribution business has increased earnings in Australia, but the Carter's chain of building supplies stores is still struggling. A main area of improvement was a doubling in earnings from the company's investment in Chilean conglomerate Copec. But the company is still struggling with Copec's Chilean shareholders to have a bigger say in its operations.

The improved prospects helped boost the company's share price 10c to $2.47 yesterday, with share brokers saying the firm's outlook was realistic and reassuring.