Revaluation & lower log prices bring $271 million loss
Fletcher Challenge Forests Ltd chopped the valuation of its forest estate by 44% to $582 million in its June year accounts released today, including a $145 million cut by raising the effective aftertax discount rate from 8% to 9.75%.
The company sold cutting rights on $143 million of the $1.176 billion crop, then cut the valuation of the remainder by $451 million. Log prices, affected by an overall 21% higher exchange rate, reduced the valuation by $298 million.
Net of tax & minorities, the revaluation amounted to $292 million. The sale of cutting rights also cost $19 million after tax. The net loss for the year was $271 million after writedowns of $31 million. Last year’s loss was $249 million, after writedowns (almost entirely from the Central North Island forest partnership) cost $351 million.
Total operating revenue rose 2% to $678 million. Domestic revenue rose 12% to $303 million, exports fell 5% to $375 million.
The company has run a trailing 12-quarter pricing series for valuation for several years, but decided to change to the prices of the past 2 quarters, which were 15% lower.
The carrying value of crop & land is now $728 million, net of deferred tax & minorities. The company cut its debt by 65% to $81 million, an 8% debt:book capitalisation ratio.
Net assets fell from $2.05/share to $1.55/share.
Fletcher Challenge Forests wants to sell the rest of its trees by the end of the year, and is refining a strategic plan for its processing & distribution businesses.
Otherwise, chairman Sir Dryden Spring said, the company had a good year.
Operating earnings before unusuals were down $2 million to $81 million, US distribution associate companies increased sales 20% in local money, log demand was reasonable and net operating cashflow was up $3 million to $46 million.