Oregon Group's profit fattened by asset revaluations

Forester Oregon Group more than doubled its annual profit, with the bottom line propped up by gains in the value of forestry and the sale of increasingly expensive carbon credits.

Net profit rose to $96.9 million in the 12 months ended June 30 from $40.4 million a year earlier, Companies Office accounts show.

Oregon is owned by Malaysia's Tiong family, with a local portfolio including Ernslaw One – the country's fourth biggest forest estate –  a cornerstone stake in recently listed New Zealand King Salmon, wood processor Winstone Pulp International, property developer Neil Group, and ClickClack kitchenware maker Innova Products.

Revenue generated from those businesses increased 5.6% to $532.1 million, to generate a gross profit of $106.7 million at a gross margin of 20.1%, skinnier than the 22.9% margin in 2015.

Other operating income more than doubled to $183 million, of which $124.2 million came from a gain in the value of the Ernslaw One forest assets. A further $30.2 million gain was booked on the biological transformation from its seedlings and fish livestock, and a $15.9 million gain on selling carbon credits.

Oregon's $84.2 million of carbon credits were valued at $17.85 per unit at the balance date, up from $45.5 million at a $6.80/unit price a year earlier.

The company's 100,000-hectare forest estate was valued at $780.9 million accounting for more than half Oregon's $1.53 billion of total assets. It held $120.6 million of land for development and $25.6 million for building and section developments.

Not all of Oregon's assets fared well, with the value of Winstone Pulp's goodwill written down by $14.5 million.

Since June, Oregon has sold its Lauriston Park Retirement Village, held under the Neil Group umbrella, in cash and shares to NZX-listed retirement village operator Arvida Group and has also had its stake in King Salmon diluted to 40% after the fish farming operator listed on the NZX.

Oregon spent $230,000 in professional fees relating to a potential capital raising, up from $200,000 a year earlier, and a further $1.2 million on business restructure, compared to $343,000 in 2015. Its auditors, EY, were paid $1.1 million,  up from $715,000 in 2015, with the difference including a $381,000 fee for advisory services in the latest year.

The company renegotiated its banking syndicate in the year, replacing a $210 million term loan and $70 million revolving cash facility with HSBC and Bank of New Zealand in December last year, with a new syndicate of BNZ, Industrial and Commercial Bank of China (New Zealand), Bank of China, Bank of China (New Zealand) and China Construction Bank Corp.

The new $210 million term loan and $70 million revolving cash advance facility attracted interest rates of 3.6 percent-to-5.78 percent in the year, compared to 4.57 percent-to-5.86 percent in 2015, and lowered Oregon's bank facility fee to $1.8 million in 2016 from $2.2 million in 2015.

(BusinessDesk)