Carter Holt's Australian unit wears $A264m charge as 2012 loss widens

Graeme Hart

Carter Holt Harvey, the forest products firm owned by billionaire Graeme Hart, has worn a $A264 million charge on its Australian building supplies group which widened its loss by 80 percent last year and left it in negative equity.

Building Supplies Group Holdings, an Australian unit of the combined Carter Holt group, made a loss of $A326.5 million in the 12 months ended December 31, compared to a loss of $A181.7 million a year earlier, according to financial statements lodged with the Australian Securities & Investments Commission.

That included a $A264.1 million impairment charge on Building Supplies' Woodproducts Timber and Plywood businesses amid "continued difficult trading conditions", director Helen Goulding says in the directors' report.

Building Supplies booked an $A129.7 million impairment charge on Woodproducts Australia Timber business goodwill in 2011, reflecting the "prolonged deterioration in the profitability of this component of the group", the statements say.

Sales fell 4.4 percent to A$914.1 million, a faster decline than the cost of sales, which put a squeeze on gross margins. Carter Holt's annual sales for the trans-Tasman building supplies group total $A2.1 billion, according to the company's website.

Stripping out the impairment charge, the unit made an operating loss of $A40.7 million, including $A14.8 million of restructuring costs and an $A1.1 million consulting bill.

Carter Holt shut two South Australian timber mills and laid off about 100 people in December, blaming the state government for refusing to renegotiate the price the firm had to pay for logs.

Rejected assistance package

The company rejected an $A27 million assistance package from the South Australian government which would have forced to it keep the mills open and maintain a minimum level of employment and production.

The loss left the unit with a shareholder funds deficit of $A56.1 million, though $A70 million in current liabilities are owed to a related party and cannot be called if that demand means the consolidated entity is unable to pay its debt.

On December 21 related party Carter Holt Harvey Investments effected debt forgiveness of $A160 million in favour of Carter Holt Harvey Australia, another member of the group.

As at December 31, Building Supplies had bank debt of $A279.9 million, down from $A445.8 million a year earlier. That accounts for its share of the combined Carter Holt facility.

The remainder of the group's debt includes fully drawn facilities by Carter Holt Harvey Finance of $NZ363.9 million and $US4.8 million and a fully drawn loan by Carter Holt Harvey of $NZ769 million. That leaves $NZ100 million of an undrawn revolving facility.

The forest products group was forced to refinance $NZ1.45 billion of debt last year after failing to find a buyer for its pulp and packaging businesses at the right price.

Building Supplies manufactures, imports and distributes panels, timber and plywood and packaging materials mainly in Australia and is owned directly by Hart's Rank Group via New Zealand incorporated Nerva Investments. It refers to the Carter Holt companies as related entities in the document.

Hart bought Carter Holt Harvey in 2006 for $NZ3.3 billion, and put a $NZ3 billion-equivalent five-year leveraged loan in place to recapitalise the group.


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A hiccup or the beginning of the end?

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At the very least it is the end of the beginning.

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Went into Bunninngs the other day and noticed all the ply was changing from CHH to Araulco from Chile. This is the effect of the high dollar. Pine finished products aren't being produced in NZ in the numbers they used to be. The logs are being exported and only niche manufacturers or brands with local and import business mixes are surviving. Race to the bottom, I say.

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The Oracle from Glendowie has so many fingers in the pie, it's hardly going to give him sleepless nights.

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