NZ should ease out of housing doldrums in spring, optimistic forester and miller says
Carter Holt Harvey reported a net operating surplus up 17.3% to $237 million on operating revenue up 16.7% to $3.8 billion for the year to March.
But its fourth quarter was poorer, with earnings down 67% to $19 million on sales up 7% at $901 million.
All round it was an upbeat result despite the severe contraction in Australian construction markets and slowdown in New Zealand construction, which affected a fair part of the business.
Chief executive Chris Liddell said in his results report that operating earnings (before income from associates, restructuring and non-recurring items) rose 44% to $364 million. Market conditions were strong in pulp, containerboard and, for the first half, Australian residential construction.
But he said the immediate outlook for the next two quarters was for difficult trading conditions as economic growth in the US, Asia and Australia slowed considerably.
Recent aggressive reductions in interest rates should flow through to increased business activity later in the year.
Residential construction levels in both Australia and New Zealand are at cyclical lows and not expected to recover until spring, when lower interest rates should encourage new housing investment.
Forest-based companies have had to battle hard for a decade to justify their existence as commodity prices have slumped. But in this report Carter Holt could show good commodity returns â€” forests ebit up 29% to $142 million on a 23% sales rise to $612 million, ebit from pulp, paper & tissue up 128% to $146 million on sales up 12% to $1.44 billion.
The wood products division increased sales 41% to $1.2 billion, but ebit fell 20% to $53 million. In contrast, the distribution group’s sales fell 2% to $452 million, but ebit rose 33% to $12 million.
Carters, the building products distribution business, traded profitably despite difficult conditions. Despite the Australian slump, the $A330 million Carter Holt paid for Australia’s leading softwood panels business and a sawmill has proven a worthwhile investment. The business remains ahead of pre-acquisition expectations, achieving a 16% cashflow return on investment for the year.
Carter Holt is also positive about its $US130 million (plus a possible $US10 million) Tasman pulp mill purchase, At trendline pulp prices and a US exchange rate of 45c, Carter Holt expects the mill to achieve a cashflow return on investment above 20%. Even at bottom-of-cycle pulp prices, it expects the mill to earn its cost of capital.