Minister for Energy and Resources Bryan Green said today the Government had agreed to an innovative plan by the forest industry to maintain supplies to the State’s sawmillers and keep harvesting and cartage contractors working.
“The solution that industry has put forward will maximise the economic and employment benefits from the Government’s $3.6 million package to help contractors,” Mr Green said.
Mr Green said the Government had consulted widely on how best to support the forest sector through the current downturn.
“The assistance will keep contractors’ employees in a job and provide the sawlogs that sawmillers need to keep operating.
“This is a hand up not a hand out and will see a significant economic return to the State.”
Mr Green said the package would help inject about $20 million into the economy, generating around $9 million worth of business for contractors.
He added that low pulpwood prices had meant forestry companies have been harvesting as close as possible to mills and ports to keep costs down.
“Using the $3 million assistance package, forestry contractors will be able to work in outlying coupes, that have a higher percentage of sawlog and wood suitable for rotary peeling.”
The remaining $600,000 will be provided to assist silviculture contractors whose businesses have been heavily affected particularly by the collapse of the Managed Investment Scheme companies.
“Consultation with the silvicultural sector is progressing to determine the best way to apply assistance to this sector.”
Mr Green said the Contractor Assistance package would mean that most harvesting and cartage contractors would be working for the next six to ten months at around 70 per cent capacity.
“About half of the contractors who had previously been delivering to woodchip mills, will now take on the new work and the remaining half will continue to supply the woodchip mills.
“We expect the new arrangement will deliver an additional 25,000 cubic metres of sliced veneer logs, sawlogs and rotary peeled veneer logs to Tasmanian manufacturers.
“The lower quality wood will be used by Forestry Tasmania to supply growing markets in China, especially for peeler logs.”
Mr Green said Forestry Tasmania would manage the new program on behalf of the Government.
The Tasmanian Forest Contractors Association Chief Executive Ed Vincent said he was delighted the government agreed to the new plan.
“It isn’t often that a $3m investment will net a $20 million return within months. More importantly, contractors are proud people who would much prefer to be doing a good honest day’s work.
“Obviously, they all would prefer to be working at 100 per cent capacity, but this package is a big step in the right direction.”
However, Mr Vincent said that while this is a resourceful solution and a positive move forward, it is not an industry cure-all.
With the announcement of FSC controlled wood by Gunns’ Japanese customers together with the improved exchange rate, it is a win for the whole timber industry, not just contractors, Mr Vincent said.
He added that keeping our industry working will keep Tasmania’s rural communities alive.
Smithton sawmiller Glenn Britton said the package was an innovative solution to a tough problem.
“It is a fact of life that it is uneconomic to harvest only for sawlog. This package will keep sawlogs flowing while the market for pulpwood improves.”
ABC Online,
International firms snap up Gunns shares
A second international firm has taken a major stake in Tasmanian timber company Gunns.
Up to 37 per cent of the company changed hands in frenzied trading last week.
American brokerage company Morgan and Stanley has told the Australian Stock Exchange it has bought 49 million Gunns shares, or 6 per cent of the company.
The investment firm has been buying Gunns shares since February.
It follows an announcement yesterday from German firm, Deutsche Bank that it had taken a 5.5 per cent stake in Gunns on behalf of another party.
Deutsche Bank has since increased that stake to nearly 7 per cent.
Australia-based Perennial Investment Partners sold off more than 47 million shares last week, when Gunns share price hit a 10 year low of 26 cents.
Perennial is no longer a majority shareholder.
Meanwhile, a Chinese paper company has dismissed reports it is investing in Gunns.
Nine Dragons is one of five Chinese paper firms identified as a possible buyer in the recent massive company share trading.
A spokeswoman for Nine Dragons says the speculation is unfounded and the company has not made any announcements about interest in Gunns or its Tasmanian pulp mill.
Other Chinese firms including Asia Pacific Resources International, Asia Pulp & Paper and Hunan Tiger Paper have not commented.
Australian Financial Review …
Timber! How Gunns investors felled John Gay
Excerpts from Australian Financial Review – Friday 28 & Saturday 29-30 May, 2010
Tree huggers tried to oust John Gay from Gunns but it took an investor revolt to get it done. Anne Hyland and Carrie LaFrenz report
It was a crisp day in early March 2010 and John Gay, the then chairman of Tasmanian timber and forestry group Gunns, drove his green Pajero 4-WD to Launceston airport. Gay must have had a sense of foreboding running deep that day as he arrived at the airport to pick up portfolio manger, Chris Haynes from Concord Capital and Charlie Lanchester from Perpetual. These two funds management firms were the biggest shareholders in Gunns – owning almost a quarter of the company; they were angry and under water on their investment.
Gay knew his meeting with the portfolio managers, which would last three hours, would be unpleasant. The two men had flown down from Sydney to meet Gay about a week after Gunns’ disastrous first-half profit result. The company was in trouble and there were fears that it might go belly up. Investors had become more nervous after the collapse of managed investment scheme operators Great Southern and Timbercorp – although they were different vehicle to Gunns woodlot schemes.
Inside the warmth of the Pajero, it was Haynes who took the initiative and told Gay he had to go; Lanchester agreed. The shareholders believed there needed to be accountability for Gunns’ under-performance and better corporate governance at the company. So for the next three hours at a café, Gay listened to the shareholders’ arguments.
It would be six more weeks before Gay responded to their demands. In Later April, not long after Gay’s 67th birthday, Gunns made an announcement that John Gay would step down as chairman in November at the annual meeting. But there was no cheering. Gunns announced it was creating a new subsidiary, of which it intended to own at least 51%, called Southern Star. Gay would be its new chairman and it would own some of Gunns’ plantations and the planned $2.65 billion pulp mill at Bell Bay in the Tamar Valley. Gay was ‘cocking a snook’ at shareholders; he wasn’t going anywhere!
If the shareholders wanted Gay gone, then the gentlemanly wasn’t working. Perpetual and Gunns’ third biggest shareholder, Perennial began selling stock this month. Perpetual slashed its holding from 14.55% to 11.67%; Perennial dumped 1.3% of its holding. Shares in Gunns plunged dramatically, loosing 40% in 10 days, down 26 cents per share.
It took this drastic action to get the Gunns board and Gay to finally act. After a monthly board meeting last Thursday, gay quit – effective immediately.
Perpetual’s head of equities, John Sevior told The Weekend AFR: “He [Gay] had been fixated on the grand vision of the pulp mill and lost sight of the existing state of the business and, most importantly, the existing state of the balance sheet.”
Gunns’ first-half earnings were nearly wiped out from $33.6 million to $400,000, thanks to a surging Australian dollar and falling Asian demand, and its stock went into free fall. Mr Gay sold a chunk of his shares weeks before the balance date was issued, further riling investors.
The severity of Gunns’ decline in earnings caught the market by surprise. Now the company is facing a class action by plaintiff firm Maurice Blackburn alleging it failed to keep the market fully informed of its financial position before the result. [Any damages awarded would likely be paid by Gunns’ insurers.]
Gunns’ market value has slumped from $1.6 billion just 6 months ago to $222 million on Thursday 24 May 2010.
