Wood processor Southern Cross Forest Products tipped into receivership
Southern Cross Forest Products, which operates five sawmills across the country, has been tipped into receivership as wood processors continue to struggle with global demand that has pushed up log prices.
KordaMentha's Brendon Gibson and Michael Stiassny were today appointed receivers of the Dunedin-based company, and will look to find a buyer for the profitable parts of its operations.
"The core business is profitable, but as with others in the sector, Southern Cross has suffered in a difficult industry environment," Gibson said in a statement. "We are working with a very strong management team to keep the business trading profitably while we run a sale process."
Some 40 sawmills have closed since 2003, according to the New Zealand Forest Owners Association. In October, the Tachikawa Forest Products sawmill in Rotorua was put in receivership with the loss of 120 jobs.
Southern Cross Forestry Products had borrowings of $17.7 million as at Dec. 31, 2012 with ANZ Bank, UDC Finance, 321 Ltd, Hunter Finance and Heartland, according to its latest financial statements lodged with the Companies Office.
It also had a $22.6 million trade finance facility with ANZ.
Total liabilities, including related party debt of $2.5 million, totalled $58.29 million as at December 31.
Its loans with ANZ and 321 were in breach of certain covenants at the time, and the 2012 accounts were tagged by auditor Deloitte over the company's ability to trade as a going concern.
After the balance date, Southern Cross Forest Products negotiated a new funding facility with ANZ which it said would be reviewed in March, 2014.
The company narrowed its annual loss to $1.58 million in calendar 2012 from $2.92 million a year earlier, as it booked a $2.34 million gain on the value of a 2009 acquisition. Revenue climbed 16 percent to $95 million in 2012, though the gross margin was squeezed to 4.6 percent from 8.6 percent in 2011, as the cost of sales rose at a faster pace.
KordaMentha's Gibson said the receivers will be seeking new owners "who can continue to build on the company's strengths" and expect to start the process in the next few weeks.