Carter Holt Harvey finds Australia profitable

By PAM GRAHAM

Carter Holt Harvey executives went to Australia yesterday to praise their businesses there, announce a quadrupling of third-quarter profit and the A$50 million ($57 million) purchase of a Tasmanian medium-density fibreboard plant.

The $60 million bottom-line profit in the three months to September 30 was up from $15 million in the same period last year and $56 million last quarter.

Revenue was $1.05 billion, unchanged from the previous quarter.

The result failed to boost the share price, which at $1.59 was 70 per cent below net asset backing.

"All I can do as chief executive is concentrate on the results over time. That will deliver share price growth," said chief executive Chris Liddell, who is trying to boost Australian ownership of the company's shares, currently at 5 per cent.

"It's obviously a very good result and over time that will get recognised."

Liddell said there was no compelling business case "just yet" to move the head office to Australia. "The expansion into Australia has not only given us great market positions and growth, it's given us a set of businesses which are earning their cost of capital and are probably going to get better from here in."

Carter Holt said it was buying Starwood Australia's four-year-old fibreboard plant at Bell Bay in Tasmania.

The company has scope for further acquisitions because its net debt was just 21 per cent of total capital, and earnings covered interest payments by 4.3 times, up from 2.4 last year.

Profit before interest and tax was $251 million in the nine months to September 30, up 156 per cent and achieved on a 3 per cent rise in sales to $3.07 billion.

About 40 per cent of that profit came from the forest business and 26 per cent from wood. The company paid no tax.

Carter Holt has nearly $6 billion, or about three-quarters, of its assets in New Zealand, including forests and pulp and paper mills, which are more prone to swings in international commodity prices.

Liddell took the opportunity to tell workers fighting against job losses and outsourcing of work at Kinleith that the mill had lost $13 million this year.

The third quarter included a $11 million expense for restructuring at Kinleith and there was $20 million to $25 million more to come. Kinleith was expected to return to profit next year.

The company moved into its final quarter worried about international prices for logs and pulp and paper, but "the outlook for our businesses which are focused on the Australasian market is relatively good".