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Red Stag Roars - To 600,000 In ’06

MEDIA RELEASE - for immediate use

31 March 2005

Red Stag Roars - To 600,000 In ’06

Just a little more than a year after the receivership cloud over the future of Waipa Sawmill was lifted, it is about to give the Rotorua region a significant economic boost.

Red Stag Timber Ltd, which operates Waipa Mill, has announced its intention to increase production by over 50%, from around 200,000 m3/pa to over 300,000 m3/pa. This expansion to the region’s economic base is equivalent to the opening of a new medium-sized sawmill and timber processing plant.

“The decision to expand production is one of the outcomes from our recent strategic review. While Waipa Mill is relatively large by New Zealand standards,
it is only medium-sized by world standards. It could become uneconomic. To secure its future, we need more volume to attain greater critical mass and to maintain internationally competitive production efficiencies”, says Red Stag executive chairman, Phil Verry.

The increased production will be primarily targeted at meeting existing increased demand for Red Stag timber from the New Zealand domestic market, with some grades produced to increase supply to Asian customers.

Phil Verry, Red Stag general manager, Tim Rigter, and marketing manager, Kirsten Cameron, have recently returned from a marketing visit to China, where Red Stag is cooperating closely with the strategy of NZ Trade & Enterprise to develop market opportunities for New Zealand timber in the burgeoning China market.

“Other timber producing nations are penetrating the China market. The Finnish industry, for example, has a strong presence derived from a powerful single-desk marketing model. To fully compete with such resourceful competitors, New Zealand timber producers need to cooperate in such markets, too”, he says.

“The Australasian housing markets have been exceptionally buoyant for structural timber. They have to soften, which makes it imperative that we: increase market share; develop new distribution channels; and maintain international standards of best practice in all areas of our business, especially service to customers, quality assurance and price competitiveness”, says Mr Verry.

In response to increased demand from new and existing customers, Red Stag is already progressively ramping-up its production. The newly targeted production level will be fully on-stream by early 2006.

Coincidentally, the expansion move will also partially counteract the effects of New Zealand’s self-imposed destructive monetary policy cycles, the latest of which is cutting a swathe through the domestic sawmilling industry, he says.

“The industry is confronted with extremely challenging conditions. Its economic viability is being hammered by the damaging effects of irrational monetary policy interventions. The consequential permanent economic destruction, which is remorselessly lowering the relative living standards of New Zealanders, is quite unnecessary, but meanwhile the timber industry, along with other exporting sectors, has to contend with the Reserve Bank’s intellectually indefensible Neroistic fiddling with the nation’s economic lifeline, the export sector. This, predictably, has caused the country’s massive unsustainable trade and current account deficits”, Mr Verry says.

“Our strategic analysis recognises that the stand-still policy option is not tenable for our company. The recent spate of closures of other sawmills, due to exchange rate pressure – which is an ongoing trend, with more closures probable – testifies to that. Such businesses as ours either go backwards, or they strategise to progress. We have the team to succeed, so we are vigorously pursuing the progressive course”, he says.

Phil Verry says the expansion will require the investment of several million dollars and will create new employment opportunities at Waipa Mill.

“Our confidence in making this decision to invest is underpinned by increasing demand for Red Stag timber, from existing and new customers serving the New Zealand domestic market and overseas markets, including Asia,” Verry says.

“We are confident we can procure the additional suitable logs – total annual log procurement will lift to over 600,000 tonnes – and, also, that we will be able to sell the extra timber production. Our commitment to absolute integrity in all of our internal and external relationships is paying off. It has given us the platform to be confident about this expansion”, he says.

In undertaking this expansion, Mr Verry says Red Stag Timber Ltd is maintaining its exceptionally low risk profile.

ENDS

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