Carter Holt rides out tough time

By CHRIS DANIELS

Carter Holt Harvey has reported flat earnings for the first quarter, with a profit of $17 million, down $2 million on last year.

Revenue rose 6 per cent to $968 million.

New Zealand's second-biggest listed company posted earnings before interest and tax of $51 million, the same as the first quarter of last year.

Yesterday's announcement was not much of a surprise.

The sale of Carter Holt's paper distribution businesses - BJ Ball in New Zealand and Raleigh Paper in Australia - for $74 million was announced with the result.

Breaking down the result into divisions, the forests section earned $24 million before interest and tax, compared with $27 million for the same period last year. Sales were down from $160 million to $141 million.

In New Zealand-dollar terms, export log prices averaged 6 per cent more than the December quarter and 18 per cent more than the same quarter last year. Total sale volumes of 1.67 million tonnes were down 26 per cent from the December quarter, the main drop coming from export log sales.

Export log sales were well down - 378,000 tonnes of logs left the country in the first three months, compared with 645,000 in the December quarter and 554,000 tonnes in the first quarter of last year.

The pulp and paper division lost $1 million in the quarter, compared with earnings before interest and tax of $17 million in the same period the year before.

Chief executive Chris Liddell said the main challenge for the forests division would be to hold recent price increases and continuing to try to get higher prices.

This would be harder as the value of the New Zealand dollar increased. He said the wood products division was expected to have a good next quarter, but the second half of the year was less certain.

Signs of recovery were being seen in the pulp and paper division. Prices were increasing, though this was from the bottom of the cycle.

"Overall I would characterise the quarter as satisfactory considering the circumstances we were dealt," he said. "The most pleasing aspect ... is that we were able to achieve the same ebit as we had at the same time last year."

At the same time last year the company was "heading into a down cycle" but conditions now were generally improving, said Liddell.

This was backed by a forestry analyst at CS First Boston, Andrew Mortimer.

"I don't think things can get any worse," he said. "I think he's cautious - the log markets can turn on and off quickly - but I think his optimism is well placed for pulp and paper.

"It is going to be slow progress. I wouldn't get too excited this quarter, but there'll be a bit of positive in this quarter and hopefully in the second half."

Carter Holt seemed to have got a fair price from the sale of its paper distribution businesses, which should not have a significant impact on operations.