Tasmanian Times

Economy

A revealing look at the forest business

Elders’ announced review of its forestry assets as advised to the market on 26th March was completed on time and is listed at …

HERE

Elders conducts is forestry operations via ITC. It still owns 50% of the Smart Fibre operation at Bell Bay (FEA in Receivership being the other 50% owner).

It recently sold its sawmilling business to Gunns (Receiver yet to be appointed).

The Report is a revealing look at the forest business, including MISs. Write downs will result in a $137 million hit to Elders’ bottom line this year. The most significant impairment resulted from a fungal pathogen which wiped out 25,650 hectares of plantations in Central Queensland.

The market is still awaiting news of Gunns’ strategic review announced a month earlier on 22nd February.

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6 Comments

6 Comments

  1. Valleywatcher

    May 5, 2010 at 4:37 pm

    Re comment #3: These are PRECISELY the kind of “risks” that were not even looked at when Gunns put out their IIS all those years ago – any way you looked at it, it was a “benefits only” analysis. According to Gunns, there WERE no costs and no risks – to the community, to the environment, to other businesses, to the viability of the project if things didn’t go according to their pie-in-the-sky plan etc. If they’d done a proper cost/benefit analysis, it would have been realized very early in the piece that this was a moronic proposal at best and they could have backed away before spending too much (of mostly our) moolah.
    Who knows? They might not have even been staggering on their last legs as they are today, having to sell off everything in order to try and keep the bank happy.

  2. Factfinder

    May 4, 2010 at 2:51 am

    Elders’ shares hit 20-year low May 4, 2010 – 7:04PM
    AAP

    Elders Ltd said its bankers are still on side after forestry asset writedowns forced a profit downgrade and sent its shares plummeting as much as 12 per cent to a 20-year low.

    A review of forest asset values resulted in $133.1 million in writedowns which will slash $136.9 million from its fiscal 2010 after-tax profit, Elders said on Monday.

    Fungal disease and lower than expected rainfall squeezed the forecast yields for its central Queensland and Esperance forestry assets.

    That would result in lower income from the Esperance assets which will cut Elders’ first half underlying profit by $3.8 million, chief financial officer Mark Hosking said on Monday.

    Yields and property values in other regions were unaffected.

    For the full story see here
    http://news.smh.com.au/breaking-news-business/elders-shares-hit-20year-low-20100504-u6rs.html

  3. Frank Strie

    May 4, 2010 at 2:14 am

    Dr. Tomkins #3, and all –
    Large scale monoculture tree crops of (relatively) native species, (for example Eucalyptus in Australia, Spruce in Europe, Pines in US), are well know to be problematic in the long run.
    They are simply speaking – unsustainable- they are not healthy functioning ecosystems, just simplistic – short lived crops.
    You seem to confirm my long held argument, that monoculture tree plantations are not forests, but just a “agricultural pursuit”.?

    The whole lifecycle analysis / whole lifecycle assessment approach is needed in our times, anything less is not “best practice”.
    The clearing (clear fell harvesting) of the tree plantations in (Tasmania’s) upper catchments, plantations on sloping – steep terrain, this in higher rainfall areas are calling for site specific management practices.
    The conversion to ground level and exposure to the elements does transfer nutrients and soil particles off site – eventually ending in the estuary silt.
    WHAT IS RESPONSIBLE FOREST MANAGEMENT?

    Responsible forest management means forests are managed in a way that protects the water, soil and wildlife. … http://www.fsc.org
    Here there New Zealand story:
    http://www.nzjf.org/free_issues/NZJF41_2_1996/3C9B76A8-5725-4ADF-B6DB-56562EBC2BBB.pdf

  4. Dr Barry Tomkins

    May 3, 2010 at 6:32 pm

    Re #1: Sirex wood wasp also caused the write-off of pine plantations in the past. Crops get written off from pathogens, flooding, locusts, mice plagues, fire etc etc. It is called risk and is common to all agricultural pursuits.

    Barry Tomkins

  5. Anthony John

    May 3, 2010 at 5:54 pm

    After release of the pulp mill IIS,my opinion on the proposal was sought by a major political party given my previous management experience in heavy industry and roles in advising government on business investment opportunities.My response was that it was a dumb proposal,any way you looked at it : economically, environmentally and socially- particularly economically.A multi-billion investment of this type requires guaranteed supply of feed-stock to the mill, and a guaranteed market for the finished product for up to 30 years !Realistically, who could guarantee either? An outbreak of disease or some other environmental disaster could wipe out forests causing a catastrophic failure of feed stock to the mill.And who could possibly guarantee market demand for the finished product (at a fair price) so far into the future given increasing competition,substitution,changes in consumer sentiment and changes in end-user specs?
    Was a comprehensive risk-analysis ever undertaken? The Elders experience is a valuable pointer to the risks ahead for this industry !!

  6. Anthony Amis

    May 3, 2010 at 4:17 pm

    Reminds me of the write-off of a similar amount of nitens plantations which were full of centre rot in NW Tassy about ten years ago. The fungus was spread by the pruning of branches.

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