CHH deal took IP global, says Liddell

By PAM GRAHAM

American forestry company International Paper has been "remarkably supportive" of its 10-year investment in New Zealand, despite lacklustre returns, because it has helped its own transformation to a global business.

That is the view of former Carter Holt Harvey chief executive Chris Liddell, who took up a finance and strategy role at IP's head office in Stamford, Connecticut, at the turn of the year. He remains on the Carter Holt board, where he evaluates proposals from, and the performance of, executives of the company he once ran.

IP, the world's largest forest company, owns 50.5 per cent of Carter Holt.

Ten years ago IP, despite its name, was pretty much a US company and it wanted to learn more about doing business elsewhere. It bought into Carter Holt from 1991 to give it access to fast-growing plantation forests and fast-growing Asian markets.

The investment also gave IP an easy place to experiment with changing its own culture and learning how to operate globally, said Liddell. It was a substantial international expansion at the time.

"There were a lot of economic reasons for the investment but I would not downplay the cultural reasons," he said.

IP executives received experience outside the US and Carter Holt itself transformed into an Australasian company with investments in Asia.

Would IP now sell out of New Zealand?

Liddell did not want to answer. He said the original reasons for the investment still held and the returns were in line with, or slightly better than, investments in other countries.

Carter Holt overall earns less than its cost of capital.

"IP has shown a willingness to look through the short term. They have a long-term approach."

Liddell said Carter Holt made its own decisions.

IP had supported the purchase of the Tasman pulp mill assets in New Zealand and a panels business at a time when it was exiting those businesses elsewhere, because they made sense for Carter Holt.

Going forward, "my attitude is if it makes sense for Carter Holt, then it is something I will support, and if it doesn't then I won't. But I will be very tough on those decisions."

Does the appointment of Peter Springford, IP's man in Hong Kong, who was concentrating on building businesses in China, as Carter Holt's new chief executive signal a shift in strategy to Asia?

"In my view, in the short to medium term, the real growth horizon for the company is Australia. In the medium term to long term, Asia will become much more important and we need the building blocks for that."

China was an important market but it was also "hard yards". It only made up 6 per cent of Carter Holt's sales.

Springford would build customer relationships and make strategic investments "of a seed nature" in China, but "we're talking about a 10-year horizon not a 10-month one".

And how has he found head office?

"It's 80 per cent the same and 20 per cent different." The level of competitiveness and intensity was higher and generally people worked hard.

The themes preoccupying management were improving board structures, governance and internal controls, and where to invest for the most value.

"One of the benefits for IP is New Zealand is a good place to be dealing with some of those issues."