Tough First Quarter For Carter Holt Harvey

Carter Holt Harvey today announced operating earnings (EBIT) before restructuring items of $31 million for the June quarter, a decrease from $51 million in March 2001 and $120 million in June 2000.

Chief Executive Officer, Chris Liddell, said "We indicated at last quarter's announcement that we expected this quarter to be tough. What transpired were market conditions in all of our major businesses at, or near, cyclical lows."

Australian housing approvals for the quarter were 26% lower than the same quarter last year. Export bleached pulp prices averaged US$400/tonne - down 42% on the same quarter last year and 24% on the March quarter. Average export log realisations were down 21% on last year and 28% on the previous quarter.

The company reduced inventory volumes by 134,000 tonnes in its Forests business during the quarter. In addition the value of log inventory was written down, which also affected profitability in this quarter.

Mr Liddell said, "Our strategy, given these tough conditions, has been to best manage those factors inside our control, and focus on the long term strategy for the company. This operating environment has only served to strengthen our resolve to pursue innovative strategies to create value for our shareholders."

Mr Liddell went on to recognise the contributions that two acquisitions made during the quarter. Both the Tasman pulp mill and Morwell sawmill traded profitably in the quarter despite market conditions being near cyclical lows.

Mr Liddell said he was pleased by the way that staff had responded to the challenges of the quarter. For example, he said the internal transformation from six groups into 33 businesses, which came into effect on 1 April, was progressing very well.

"In retrospect we couldn't have picked a more difficult time for such a major restructure. However I am extremely encouraged by the way our people have managed the change," he said.

Carter Holt Harvey also reported that it would take accounting charges totalling $29 million, of which $25 million was a non-cash write off for two plants that were mothballed last year - the Mataura paper mill and Mt Burr sawmill. Mr Liddell said that unfortunately in the current environment, the likelihood of these plants re-opening in the near future is remote.

After interest costs and one-off restructuring charges, the company has reported a net loss for the quarter of $34 million.

Mr Liddell added that while the outlook for the short term will be constrained by the current global economic conditions, some leading indicators, such as the Australian residential construction sector, were improving.

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