CHH lowers profit forecast

Wood company Carter Holt Harvey has pruned its 2005 operating profit forecast by $17 million to $283 million - mainly blaming low pulp prices.

Chief executive Peter Springford said a second factor was the company's lowered expectation of the number of new homes to be built in Australia this year.

The forecast replaces one issued in April, is based on the NZ dollar trading at 71USc, and compares with 2004's operating profit of $259 million.

New Zealand's third-largest listed company said global demand for pulp was soft because of weak paper markets in Europe and North America, while the Australian housing market "continues to look weak".

It has cut its forecast of homes to be built there from April's 150,000-155,000 to 146,000.

Carter Holt reported an operating profit for the three months to June 30 of $64 million - up from $61 million in the same period last year.

Alliance Capital portfolio manager Andrew Bascand said the profit was less than $20 million if stripped of gains from foreign exchange hedging and land sales.

Carter Holt's future is uncertain as International Paper tries to offload its majority shareholding.

Revenue from continuing operations for the quarter was $838 million - down from $842 million.

Net profit was $50 million (including a $12 million increase in forest valuation) - down from $421 million, a number swelled by Carter Holt's sale of its tissue business.

Operating profit from the wood products division fell to $12 million from $20 million as lumber prices in Australia dropped.

Pulp and paper profit fell to $5 million from $10 million.

Packaging earnings were unchanged at $13 million and forest earnings rose to $34 million from $18 million, aided by $7 million of land sales.

News from the results briefing included:

* Plans to provide potential bidders for International Paper's stake with confidential company information from next month.

* Fresh detail of a programme to convert forestry land to other uses.

* The start of a phase-out of foreign exchange hedging.

* Criticism by chairman John Maasland of the Government's failure to provide tax benefits to New Zealand forestry investors like those available to overseas counterparts.

* A 5c interim dividend - up from last year's 3c.

The chief executive of the forests division, Jeremy Fleming, revealed that 36,000ha of land, mainly in the Kinleith estate, had been identified as suitable for alternative uses.

But it's a long-term game. Land becomes available as trees are harvested and Fleming's presentation indicated the programme could run until 2023.

He said about 80 per cent - or 28,800ha - was suitable for conversion to dairy farming.

The company says sales for dairy conversions over the past five years averaged a price of $7500 a hectare - and conversions now could be worth $8000 to $10,000 a hectare.

That suggests 28,800ha could be worth $216 million to $288 million.

The company said land suitable for lifestyle conversions could be worth more: $10,000 to $25,000 a hectare.

That sent analysts back to their calculators, to crunch more numbers, although one asked aloud: "What's the lifestyle around Kinleith and Tokoroa?"

* Carter Holt Harvey profits

Six months to June 30, 2005:

* Sales - $1.586bn

* Operating profit - $113m

* Forest value change and one-offs - $100m

* Net profit from continuing operations - $140m

* EPS continuing operations - 10.6c

* Dividend - 5c (fully imputed, payable August 23)

- additional reporting by Bloomberg