Economy
Race to the bottom
On Tuesday 25 May Gunns share price dropped from 35 cents to 26.5 cents.
And the question was being asked by stock market insiders: Is the trashed Gunns a takeover target?
The old-growth jungle drums were beating louder and more furiously after the Tasmanian forestry company disposed of its retail assets to the Woolworth-Danks venture for $40 million. The announcement on Monday was treated with indifference as the stock tumbled 8.5 cents (or 24%) to 20-year record lows, trading on heavy volumes. Some valuations still mark the Gunns stock at around 60cents a share.
As Criterion’s Tim Boreham suggested, Gunns is messier than a freshly chain-sawed coupe, given its weak Asian woodchip demand, poor managed investment scheme plantation performance, financial doubts about its Tamar Valley pulp mill and a shareholder class action alleging misleading disclosure.
A mess indeed and two of Australia’s largest funds managers and Gunns larger shareholders began massive off-loading of their share in the ailing timber company. Between them, Perpetual Ltd and IOOF Holdings have been major contributors to Gunns dramatic share price slide. Over 70,000,000 Gunns shares have been traded in the last few heady days and it is set to continue.
The Gunns Ltd fire sale has come on dramatically after the pre-election hesitancy of February and March 2010. Many were aware of that all was not well in the Lesley Street head office; there was the vague announcement in February of a plan to hive off its forestry estate and there were rumours that forestry unions and Gunns were involved in desperate negotiations with The Wilderness Society to end the decades-long war over old growth logging in Tasmania’s forests.
Other parts of the Gunns Empire are also up for sale: Tamar Ridge vineyard and wine label, 28,000 ha of native forest estate and walnut plantations.
As Tim Boreham suggests, it was easy to ‘sniff the Eucalyptus-scented winds of change in the departure from the defiant old-growth logger Gunns, when it announced that four of its Japanese woodchip customers were on their way to achieving Forestry Stewardship Certification approval wood sourced from specified coupes.
Despite the $40 million injection from the sale of 6 hardware stores (Mitre-10 and Becks stores), a timber joinery centre and a truss manufacturing plant, Gunns remains lumbered with more than $600 million of debts owing.
Whichever way you look at this, it is a catastrophic fall for the management of Gunns Ltd.
Just recently it was a closely fought race between Gunns and the deeply divided Wilderness Society as to which would implode first.
Now John Gay’s Monopoly Game is over, after the closure of the ASX on Thursday, Gunns chief announced his resignation and retirement after 37 years with the company – effective immediately.
And so what was all that rush for the forestry roundtable about….I wonder?
Norway to pay for Indonesian logging moratorium
TOM ALLARD INDONESIA CORRESPONDENT
May 28, 2010
The Age
INDONESIA’S President, Susilo Bambang Yudhoyono, has announced a two-year moratorium on new logging concessions, part of a deal with Norway in which Indonesia will receive up to $US1 billion ($1.2 billion) if it adheres to a letter of intent signed by the two countries yesterday.
The initiative was warmly welcomed by environmentalists. It will put curbs on Indonesian’s lucrative palm oil industry and could delay or slow plans for the creation of a huge agricultural estate in Papua province.
Addressing reporters on his way to Oslo, where the deal was signed, Dr Yudhoyono said Indonesia had to balance its needs for economic development with its responsibilities to prevent a rise in carbon emissions, which the majority of scientists say are responsible for global warming.
”Indonesia is really able to maintain its tropical forests, meaning that we maintain the lungs of the world,” Dr Yudhoyono said, according to the official Antara news agency.
”It is not merely Indonesia but also the rest of the world which will enjoy the fruit.”
Indonesia is the world’s third largest emitter of greenhouse gases, with 80 per cent of those emissions due to deforestation.
As well as felling trees that absorb carbon, deforestation in Indonesia’s swampy peatlands releases carbon from the exposed peat as it dries. It also often leads to huge fires that are very difficult to control and spew out more greenhouse gases.
The rapid expansion of the palm oil sector and granting of million of hectares in new logging concessions in recent years have accelerated deforestation, including in peatlands. Under the Oslo plan, those concessions will still be able to be logged, but new areas will not be opened up.
Norway will pay the Indonesian government in instalments, and closely monitor whether the forest areas are protected.
Norway’s Prime Minister, Jens Stoltenberg, said: ”If there is no reduced deforestation we will not pay; if there is reduced deforestation we will pay.”
Indonesia has a pervasive problem with illegal logging, an activity Dr Yudhoyono has indicated he will cracking down on as part of a broader anti-corruption push.
”We congratulate President [Yudhoyono] on his commitment in Oslo,” said Bustar Maitar, forests campaigner with Greenpeace Indonesia. ”This is a very large step and shows he is committed to stopping forest deforestation and climate change.”
According to Greenpeace, forests covering the equivalent of 300 football fields are eradicated every hour in Indonesia, which with Malaysia produces 80 per cent of the world’s palm oil. Palm oil is used for cosmetics, fuel and as vegetable oil in many foods such as snacks like chocolate bars and crisps.