Fletchers Announces Unusual Financial Items

FLETCHER CHALLENGE ANNOUNCES
UNUSUAL FINANCIAL ITEMS

AUCKLAND, 25 January 2001 – The Chief Executive of Fletcher Challenge, Michael Andrews, today announced a number of unusual items which will be included in the Information Memoranda being distributed to shareholders in mid-February.

“These items relate to both the sale of the Paper Division in July last year and the operations of the Forests, Energy, and Building Divisions,” Mr Andrews said.

In the Forests Division, a NZ$574 million write-down has been recognised in respect of the investment in the Central North Island Forest Partnership, and a provision of NZ$5 million established to cover the costs of defending the claims of CITIC New Zealand Limited. Details are provided in a separate release.

In the Energy Division, the November sale of almost 800,000 Capstone Turbine shares through the secondary offering has generated an unusual gain of NZ$50 million. The sale of New Zealand Refining Company shares in October resulted in a gain of NZ$25 million. These gains were partially offset by a provision of NZ$13 million relating to the Group’s interest in the Kupe field.

In the Building Division, a provision of A$20 million has been established for a long-standing dispute in respect of construction of co-generation plants in Australia. Planning decisions have led to a write-down of NZ$11 million in the value of Auckland properties, and restructuring of parts of the concrete business results in a charge of NZ$8 million.

The sale of Fletcher Challenge Paper to Norske Skog in July generated a net accounting gain of NZ$440 million over the historic book value.

In addition, separation costs for the six months to 31 December 2000 amounted to
NZ$55 million, of which NZ$26 million related to the early repayment of term debt.

Taxation benefits attributed to Fletcher Challenge Paper, and transferred to Energy and Forests at fair value, have resulted in Energy and Forests recording unusual gains within taxation expense, totalling NZ$215 million, with a corresponding loss in Paper.

“These Unusual Items, summarised in the attached table, result in a net loss of NZ$97 million for the Fletcher Challenge Group, and will be reflected in the Group earnings to 31 December 2000,” Mr Andrews said. “Further detail of these items will be included in the documentation relating to the separation process to be sent to shareholders in mid-February,” he concluded.

The interim profit announcement for the Fletcher Challenge Group is scheduled for February 28, 2001.

Attachment:
Table of Unusual Items

Building
$m Energy
$m Forests
$m Paper
$m Group
$m
Investment in CNIFP (574) (574)
CITIC litigation (5) (5)
Sale of Capstone Shares 50 50
Sale of NZRC Shares 25 25
Kupe (13) (13)
Australian construction (25) (25)
Properties (11) (11)
Concrete restructuring (8) (8)
Sale of Fletcher Challenge Paper 440 440
Separation Costs (12) (19) (24) (55)
Total Net Earnings before Tax (56) 43 (603) 440 (176)
Transfer of Taxation Benefits 161 54 (215)
Taxation Benefit / (Liability) 7 5 50 17 79
Estimated Net Earnings after Tax (49) 209 (499) 242 (97)

Ends

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