Holt Harvey focused on future returns and growth

Holt Harvey focused on future returns and growth

20 October 2004

Carter Holt Harvey (CHH) today announced its consolidated net earnings for the nine months ended 30 September 2004 were $409 million, compared with $162 million for the same period last year. This includes a gain from the second-quarter sale of the Tissue business.

Net sales were similar to sales in the same period last year, when adjusted for the divested Tissue business. For the nine month period, operating earnings before interest and tax (EBIT) from the continuing businesses were slightly less than the same period last year. The main reasons for this difference were charges of $16 million associated with the company’s Share Growth Plan and Pension Fund.

Operating EBIT for the quarter was 22% better than last quarter. This was due to underlying improvements in business performance and the inclusion of earnings from Plantation Timber Products (PTP), the Chinese specialty panels business Carter Holt Harvey acquired in July.

Financial summary
YTD Ended
Quarter Ended

Sep 2003
Sep 2004
Sep 2003
Jun 2004
Sep 2004

Net Sales
2,847
2,693
1,007
898
852

Net FX Gains
150
89
47
29
19

EBITDA
424
380
158
118
130

Operating EBIT
234
197
89
58
71

Abnormals
-
401
-
401
-

Equity earnings

Net Interest expense
5

77
4

31
1

20
1

6
1

9

Tax expense/(credit)
-
162
-
(4)
150

Net Earnings
162
409
70
458
(87)

Total Debt to Total Capitalisation
20.0%
22.4%
20.0%
20.0%
22.4%

EPS
9.4c
24.1c
4.1c
26.3c
(4.4)c

Following a comprehensive review of its New Zealand forest holdings, Carter Holt Harvey advises that it has decided to retain its Kinleith, Nelson, Woodhill and Northland forest estates. These strategically important estates represent approximately two thirds (220,000 hectares) of the company’s total estate, supporting CHH’s current and potential processing requirements. The company is also giving consideration to extending its wood processing operations through construction of a new world-scale sawmill.

Carter Holt Harvey will investigate sale options for the balance of its 327,000 hectare estate, i.e. its ‘non-strategic’ forests in Auckland, Coromandel, Hawkes Bay, Bay of Plenty and Canterbury.

As a consequence of this decision and as required under NZ GAAP (Generally Accepted Accounting Practice), the company has accrued a non-cash deferred tax expense, associated with its non-strategic forests, of $128 million. This is part of the potential liability described in the company’s 2003 Annual Report (at Note 11 to the Consolidated Financial Statements).

Peter Springford, Carter Holt Harvey Chief Executive Officer, said the forests decision was an important step in executing a strategy focused both on improving shareholder returns and achieving long term growth for the company.

“The year to date has seen us manage a very successful divestment of our tissue business, and purchase China-based premium panels business Plantation Timber Products, which has already contributed $5 million of EBIT to our bottom line in this quarter. During the quarter we have also distributed $530 million to shareholders in the form of dividends and a share cancellation.

“Both the PTP acquisition and the decision on our forest estates provide a clear indication of Carter Holt Harvey’s strategy. We will continue to invest in higher returning assets that deliver growth in our core areas - wood products, pulp, paper and packaging, supported by our forest assets,” said Mr Springford.

“Looking ahead to the world class, wood fibre-based manufacturing business we are striving to be, we are very conscious of retaining the right parts of the estate to support our current and future processing requirements,” said Mr Springford.

The company has also continued its intense focus on productivity improvement, largely offsetting the impact of the strong New Zealand dollar. Previously discussed production difficulties in the Australian Wood Products operations were resolved early in the quarter, and while the Australian building market is moderating by region, New Zealand remains strong.

Capitalising on the strong New Zealand market, Futurebuild’s Marsden Point LVL facility achieved its best ever quarterly production output and Carters, the company’s building products retail business, recorded its best ever quarterly sales result.

The company’s $62 million upgrade of its Whakatane Cartonboard mill is achieving ramp up expectations, with positive feedback from customers on the lower weight, higher strength folding carton board.
ENDS

Unless indicated, all figures are in New Zealand dollars.

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