Tasmanian Times

Economy

Gunns: The Next Chapter?

The Truth and Reconciliation Roadshow continued last week with a presentation by Gunns’ CEO to a conference run by investment bank UBS, coincidentally a Gunns’ shareholder.

The changes from the presentation which accompanied the release of Gunns’ preliminary 2010 financials in mid August were subtle and revealing of the future chosen path.

John Gay’s business model was then described as being “a conglomerate of long life low yielding assets…..(consisting of) many businesses….. excessive levels of encumbered assets …..excessive debt levels to earnings,….. (where) potential investors do not understand the business.”

The latest presentation includes further criticisms of the old model. Mr L’Estrange confirmed that Gunns was “cash negative” and was bedevilled by “aging inefficient assets”.

Cash negativity is a fairly serious condition. If it persists disaster usually awaits. Aging inefficient assets make the problem worse. Forget about a social license. Gunns needs cash and a more ‘efficient’ portfolio of assets.

In August the new look Gunns was to comprise a division devoted to ‘hardwood and softwood’ sawmilling.

This has now been revised to ‘softwood processing’ only. No mention of hardwood sawmilling. Literally, this means an exit from all hardwood sawmilling not just native forest sawmilling.

Normally a CEO when spruiking his Company will attempt to explain and justify the latest P&L Statement. UBS has been critical in the past of the book entries of Dickensian proportions that have been used to prepare Gunns’ financial accounts. Hence Greg didn’t dwell on Gunns’ appalling 2010 results. He was on a hiding to nothing. He simply said “if your investment focus is purely about this year’s trading, GNS is not your stock”.

Never a truer word has been uttered.

The latest presentation concentrates on the balance sheet and the opportunities that may ensue. The net operating assets (before bank loans of $660 million) are listed for each of 8 segments.

These are:
1. Forest products (woodchipping) $109 million.
2. Hardwood sawmilling $179 million.
3. Softwood sawmilling $144 million.
4. Softwood plantations $250 million.
5. MIS $413 million.
6. Wine/walnuts $45 million.
7. Other $32 million.
8. Pulp $1,165 million.

A total of $2,337 million. More details can be found on page 9 of http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01110388

Now to have a closer look at the suite of assets.

1. The woodchipping side of the business contains $57 million of land, some aging woodchipping plant and not much else.

2. Hardwood sawmilling contains $119 million of inventory and a bit of land and plant for a total of $179 million.

3. Of the $144 million net operating assets for softwood sawmilling, almost half, $60 million, are intangibles relating to goodwill/trademarks when Auspine was acquired. Of the rest $31 million is inventory and $57 million buildings and plant. A bit thin.

4. Softwood plantations contain $222 million of land. And $88 million of trees which are on the market. But then it will require $40 million to acquire the sawmill and the 290,000 tonne pa resource from FEA. The trees to be sold are believed to be in SA. Gunns will probably use the proceeds to fund the FEA purchase.

5. MIS management is Gunns’ second largest segment in $ terms, a total of $413 million. The management relates to existing schemes. Further schemes are not contemplated at this stage. Loans of $237 million are due from MIS investors, and a further $140 million is an estimate of the value of future commissions due at harvest time from MIS proceeds. Gunns conveniently omits future MIS expenses from the financials, the legacy costs which help sink Great Southern. These expenses are only given a cursory mention as a contingent liability in the Notes. Before the Great Southern deal Gunns managed 106,000 hectares of its own MIS plantations. The Great Southern deal added a further 130,000 hectares (only 7,400 hectares in Tasmania). Gunns only paid $6 million in a competitive tender situation to acquire the Responsible Entity rights to 9 Great Southern Project. This enabled it to immediately bring to account $67 million of future earnings. Other tenderers must have mispriced the asset. So much for the Efficient Market Hypothesis. Maybe Gunns are overstating their windfall? The book entry provided a timely boost to Gunns’ sagging Balance Sheet. The future commissions could be worth as little as threepence halfpenny if the travails of Timbercorp and Great Southern are any guide. And the loans to MIS punters have sold for as little as 30 cents in the $ in the past.

6. The wine assets have been sold for $33 million and the walnut assets will soon follow.

7. The ‘other’ of $32 million is minor. It includes the construction business which will be transferred to Hazell Bros.

8. The remaining 50% of Gunns’ net operating assets will form part of the pulp mill business which will be “vended into the project”. Sold to another entity?

Before looking at the ‘pulp’ assets just a few comments on the remaining 7 segments.

There’s nothing of sufficient quality that will cause investors to queue. And there’s nothing with security value to attract bankers.
After the walnuts go, the next most realisable asset is the hardwood sawmilling inventory of $119 million but this presumably will occur as Gunns’ planned structure includes softwood processing only. To sell it so soon after the ITC Timber acquisition last November is a little puzzling and possibly indicates the seriousness of Gunns’ current predicament. That acquisition was designed to take advantage of synergies with Gunns’ existing hardwood sawmilling operations. And in 2010 it seemed to work, as it appeared to be the only part of the business with positive cash flow.

The balance of the softwood plantation with a book value of $88 million is “subject to current sale process”. This sale certainly raises the question of why Gunns bothered to purchase Auspine, barely 3 years ago. The gross assets totalled $500 million. But it has since sold three quarters of the trees and is about to sell the rest, has closed down one mill and about to close another. The only tangible asset remaining will be $222 million worth of land growing other people’s trees.

Gunns’ strategy, incidentally, is to “capture full value from the assets on the balance sheet and create a new future”. Just in case you’re wondering.

Unless one is a paranoid conspiracy theorist it’s a little difficult to see any Green or Geoff Cousins’ role in Gunns’ Auspine debacle. It appears to be an example of Gunns’ decision making during the Gay years.

The need for cash is what’s driving Gunns. A social license is ancillary. Gunns knows by how much it needs to reduce debt come December 2011 before major loans are renegotiated. That’s why it’s quitting hardwood sawmilling. So it can sell the sawmilling inventory. Take a look at the other aging inefficient assets in the first 7 segments. There’s not much else of any value. This limits borrowings, even if there was cash flow to support borrowings, which there isn’t.

Selling assets to reduce debt invariably falls short of expectations. The sale of assets prior to June 2010 did nothing to reduce debt. Gunns simply used any spare cash to survive.

Withdrawing from native forest sawmilling has been portrayed as a noble goodwill gesture designed to promote an end to years of division. But a sceptic reading the financials could well conclude that there was no other option. Directors had no alternative pursuant to their statutory responsibilities and fiduciary duties.

Paying compensation for the alleged noble gesture will indeed create a dangerous precedence.

There are suggestions that Forestry Tasmania will take over the Triabunna facilities. That’s unlikely to produce cash. It will simply be offset against amounts owed by Gunns to FT. Which won’t help FT either ‘cos like Gunns it needs cash. Unless it dips further into the jar of TCFA grants?

The ‘pulp’ net operating assets of $1,165 million contains $585 million of land and forest roads, $241 million of plantation trees and $320 million of buildings plant and equipment, the largest component being $205 million spent on the mill to date.

It is likely that most of Gunns’ current debt of $660 million will need to shift with the ‘pulp’ assets. Which is hardly likely to impress joint venture partners or prospective lenders to the project.

Gunns owns about 65,000 hectares of hardwood plantations in Tasmania, mostly on its land. There are a further 106,000 hectares of Gunns MIS schemes, again mostly on its land, and a further 7,400 hectares of Great Southern’s plantations here in Tasmania which Gunns are now ‘managing’. The latter are of dubious quality if the 800 hectare Temma plantation is any guide. Cattle still enthusiastically graze the property. Agroforestry is not normally practised with such young trees. There are extensive areas where the tree population is similar to that of the Sahara Desert. My ute will be available for the afternoon when cartage to the mill door is required.

There are also private plantations and FEA has about 35,000 hectares of MIS plantations in Tasmania. The fate of the latter hasn’t been decided but fast tracking harvest operations is likely to occur, before the land is sold by the bankers.

A pulp mill of the size contemplated will probably need a plantation resource of almost 200,000 hectares. It always a little difficult to work out the size of the hardwood plantation resource, its location, age, current volume, estimated volume at harvest time and importantly who owns the crop. This has changed markedly since Gunns’ first pulp mill proposal. Maturing crops have disappeared at a faster rate than replacement crops now that MISs have dried up. Current MIS investors are likely to continue to exit at harvest time. They will need to be bribed to stay. Or ‘offered compensation’ may be the more polite phrase. Both Gunns and Elders have been reported as saying half of the current national estate of 800,000 to 900,000 hectares won’t be replanted.

Even if the pulp mill doesn’t proceed a full audit of the available plantations estate is required if peace talks are to be advanced.

Gunns dilemma is quite simple. When financiers are taking a detailed look at the financials they can’t help but notice that borrowings haven’t reduced since loans were taken out to purchase assets from Boral and North Forests. These assets are now a crappy pile of junk. Sure, there’s a bit of land but most of that is leased to tax recalcitrants to grow slow growing trees which if protected from interfering cattle may produce sufficient at harvest time to cover harvesting and transport costs. And then they’ll probably exit the industry with their share,85% to 95%, of whatever remains. Who’s going to replant? More Government assistance?

Hopefully the next chapter will see a new era for native forest sawmillers, smaller more nimble players free at last from the over arching dominance of the industry’s major player which is now a business with aging inefficient assets, excessive levels of encumbered assets, excessive debt levels to earnings, cash flow negative and increasingly dependent on a highly unstable plantation industry yet to evolve beyond failed MISs.

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50 Comments

50 Comments

  1. m3 ds real

    March 10, 2013 at 10:18 pm

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  2. innerturmoil

    November 22, 2010 at 11:07 pm

    Hmmm…maybe Gunns saw just how well the FEA sawmill cut timber, after all Gunns need the cash and a good wood chip supply that is sourced from plantation softwood. Can a leopard really change its spots?

  3. Observer

    October 30, 2010 at 6:30 pm

    #51. It is time te laugh ye aussies down under.
    laughter rights all wrongs.
    Johnnie Grant

    If only it were true!

    Mind you there are some who would laugh – mostly on their way to the bank!

    They would find it funny that the air we breathe and the water we drink are poisoned.

    The forests have disappeared into a giant chipper and we are left with desolation and destruction.

    Our wildlife, which once was abundant, is now facing extinction in many cases.

    Our farmland is being converted to non-edible ‘crops’ of pulpwood.

    Our taxes are being poured into the bottomless pit of subsidies for the destructive forces of Forestry and Gunns.

    Our rights as citizens are being prescribed in favour of corporation profits.

    And we have no voice or control over our lives or future, or for our children’s future.

    But one good laugh will make it all come right!

  4. Johnnie Grant

    October 28, 2010 at 7:10 pm

    I wis thinkin’ Laddie, what aboot gettin’ yer cartoonist to draw a wee picture of a wee moose asking for her bit O paper in front of the MMG mines and the bloke who git her arrested is standin’ like a Rochweiller snarling’ and the wee lassie, the moose, is nae scared of him, no she is like brave heart, mel gibson and she says
    ” ye mae take mah wee dog from this toon, but ye will never tak away mah freedom! Give me mah paper the noo!

    It is time te laugh ye aussies down under.
    laughter rights all wrongs.
    Johnnie Grant

  5. amyb

    October 28, 2010 at 6:05 pm

    #45 – OK Mark, what has exactly occurred, then? Always these statements, never any evidence to back them up other than hearsay. Let’s have a proper answer as well, not some hysterical nonsense about a few Wildos and powerless politicians bringing down the whole industry by visiting a few people in Japan. Even if indeed that really was the case, perhaps you should then look to yourselves as to why a few spacey greenies convincing the Japanese to abandon you was so easy?

    #46 – crf, why is it that you just cannot help yourselves? Perhaps decades of protection, subsidies, legal bullying and threats leads to this continuation of patronising, arrogant and bullish answers, talking down to all and sundry not camped in forestry’s corner as though the rest (and that’s most of Tasmania – you only represent about 2-3% of the population directly) of us are complete morons and idiots.

    Take a flight over Tassie’s public forests sometime (real-time or via Google Earth) and just who are the real morons and idiots is graphically revealed by the vast areas of clearfell desperately trying to meet up with one another before the brakes are finally applied.

    It is said over and over again, but you’re all so blinkered you seem incapable of understanding that all your spin and protest goes nowhere anymore – thanks to the good folk at Google Earth we can all now actually see what you’re doing to the public forests and the scale thereof, and any amount of obfuscation and BS is simply wasting breath and time now the locked gates no longer hide the truth. And there’s not a damn thing you can do about it, either. Must be frustrating after all the years of carte-blanche?

    Most people aren’t objecting because they want to hug trees or some such fictitious nonsense anyway – they’re objecting because you’re destroying or have destroyed one of Tassie’s most valuable public assets and for years have returned little or nothing to the owners to show for that destruction, all the while being propped up by taxpayer-funded breaks, political support and legal circumventions. My guess is that most people are objecting because they’re just plain sick and tired of the continuing unbridled waste and loss.

    For all your demands that we supply you with reasons for everything, you fail to answer an even simpler question – “why should the rest of us hand over, without question, our public native forests to you lot to do with as you wish for no return to us?”

    So once more – we can *see* what you’re doing!

    (Having re-read this, perhaps I should in fact concede that the rest of us are indeed morons and idiots for letting this costly destruction go on for as long as it has. Maybe we deserve to be talked down to with such disdain by the perpetrators, who must smugly giggle their way to sleep at night for the ease in which they accomplished this and the money they’ve made for themselves from it. I guess I would too if I were in their shoes. Great con, guys!)

  6. Change Agent

    October 28, 2010 at 12:14 pm

    #42 So many questions Bemused, soo many questions.
    Do you suggest that the situation in Tassie was open and transparent for new investors in timber processing?
    FT & GNS ruled the block and the situation has names attached that will need a good hard look at.
    The answer to your questions and concerns will be addressed when the clean out has happened.
    No rush, the forests have time and the debate has not even started proper.
    That will do for now.

  7. Russell

    October 28, 2010 at 2:04 am

    Re #45
    I believe it is you Mark who are illustrating a distinct lack of understanding of what has actually occurred.

    Firstly, this document is NOT an agreement, it is the “Tasmanian Forests Statement Of Principles To Lead To An Agreement.” Note the words “To Lead To”.

    Secondly, tell me exactly where in this document it says “the agreement is to ultimately phase out native forest logging” or anything like it? Try having a peak just at the first principle under the heading “General Wood Supply.”

    How much clearer can I be?

  8. Chad C Mulligan

    October 27, 2010 at 2:15 pm

    “ultimately phase out native forest logging”

    Got a date on that have you Mark? Didn’t think so.

    The ‘agreement’ is a con. The ENGOs have been suckered. And they need to be told so loudly and often.

  9. crf

    October 27, 2010 at 1:55 pm

    amyb (#43), sad! “Mark” or “MArk” – what does it matter? I can think of a very simple and un-interesting explanation for the variation. I’d put money on it being the true reason. Can you too think of a non-interesting reason?

  10. Mark Wybourne

    October 27, 2010 at 1:09 pm

    Re 43: You are illustrating a distinct lack of understanding of what has actually occurred.

    RE 41: Russell. Are you pulling my leg – the agreement is to ultimately phase out native forest logging. How much clearer can I be?

  11. amyb

    October 27, 2010 at 1:21 am

    Interesting that we have a Mark Wybourne and a MArk Wybourne responding here. Would the real M. Wybourne please stand up?

    And no, there’ll be no retraction of anything from me, Mark (#30), because it is simply preposterous to even begin to suggest that a few rag-tag Tassie environmental groups visiting Japan and perhaps addressing a few patient paper-making lower management underlings with arguments expressed over a truly huge language barrier could single handedly demolish an entire Tasmanian industry. Such is simply being paranoid.

    The sooner you forestry lot wake up to yourselves that you caused this fiasco all on your ham-fisted own despite all the subsidies, and laws being twisted and rewritten to suit continuation of your archaic and greedy methods which have trashed huge areas of previously productive forest and left vast stands sub-standard young regrowth and plantations fit only for the most basic of end uses – chipping and burning.

    Well done guys, you deserve every bit of what’s happening to you. Every time you come thumping in here with your chest-beating anti-greenie, anti-environment arrogant and self-righteous vitriol you no doubt do nothing other than add to the opinion rallying against you. So please, keep it up. 🙂

  12. Bemused

    October 26, 2010 at 11:49 pm

    And who will build and maintain the roads to harvest it? Who will fall it and what methods will they use? How will it be transported? Who will go and select which trees are to be felled? What will happen to the trees that are harvested and turn out to be no good as saw log? Which sawmillers will be writing the FFPs and who will be checking them and monitoring compliance on the ground? what happens when the small sawmiller has sooo many orders that he decides he needs to be bigger and demands more access to forest? And what happens they move in and start falling trees in areas they shouldn’t be in and end up killing themselves because they dont have a clue what they are doing?

  13. Russell

    October 26, 2010 at 6:54 pm

    Re #37
    “Why can’t you understand that, in essence, there will be NO native forest resource available within a few short years?”

    Come on Mark, tell me why there will be no native forest resource available within a few short years?

    If Gunns and FT are gone, there’ll be a shitload of it forever.

  14. Question Authority

    October 26, 2010 at 6:20 pm

    TO WHOM IT MAY CONCERN.
    Executive Government Cabinet has decided (in consultation with itself and peer reviewed) that in order to assist our small humble but proud, best practice island, to move forward to a dynamic pointy output of maximum extraction of maximum proven potential value; advises; please TAKE NOTE.
    A newly created position, within DPAC Media Monitoring and Intervention Unit, DPACMM&IU;, is in the process of being peer developed and created for the employment strand, Executive Band 1 to 3, Senior Soothsayer, Grades 1 to 5. All those with proven experience in this yet to be scientifically proven (and peer reviewed) Art of Soothsaying, are especially encouraged to apply. Critical development skills of a tight order will be measured and favorably considered. These are not mandatory however. Those with documented and proven experience in this Strategic and Evolving Field are warmly encouraged to apply. (Executive pocket pissing is disallowed in the Unit as some of the existant executives operate without pockets for pissing purposes, and it sets the sprinklers off). Broad shoulders are not required as Statutory Responsibility and Obligation (at Law) do not have the force of law within the DPACMM&IU;. We have an exemption. Worrying is therefore discouraged for the purpose of this Eminent Employment and disallowed. Hindsight will not be required to be considered either.
    The Executive Monitoring Media and Intervention Unit encompassing this Governments’ Progressive Staffing Policies Policy; reminds potential applicants of the Units’ Equal Employment Opportunity Practice Policy. (Although, provision is available for this to be able to be set aside for this current Eminent Employment Appointment Procedure). There is only one minor Mandatory Selection Criteria; that being; proven paid membership of the Prevailing Political Party of the Day. Applicants are advised this will be monitored and verified on a semi regular basis, depending on demonstrated disagreeable outputs. Also, forward thinking is not required as we have a manual for this, therefore, applicants addressing this criteria for this Specialist Eminent Position are reminded that in addressing the Selection Criteria, would need to prove the applicants suitability to engage long term, regardless of any possible change of government. Three positions are currently vacant or maybe more. No previous experience in knocking down large new or old trees, mass poisoning of small nocturnal creatures or whole water catchment poisoning is considered necessary. Training will be provided by Senior Soothsayer Grade 5. Plantation Planting experience will be highly regarded and especially Burning (being peer developed) is considered mandatory. Proven longevity in smoke breathing, highly desirable. (Own medical insurance required). Proven executive experience in peer reviewing POO is also considered not vital to this new, exciting creative position. We have a manual for this as well and Practical Practice will be provided. Another mandatory Executive Selection Criteria is the proven and documented ability is to NOT…NEVER…EVER… to..

  15. Factfinder

    October 26, 2010 at 2:16 pm

    #36 – Just ask yourself, why would it be here in Tasmania much difference to the situation post decades of forest mining operations in California and the Pacific North West?
    Read for yourself and you may learn something of change ahead:
    A Roadmap to Clean Water: The Legacy Roads and Trails Remediation Initiative
    February 16, 2010

    The main threat to water quality in many national forests is the Forest Service’s vast and crumbling road system, an environmentally-harmful vestige of the agency’s industrial logging era.

    With The Wilderness Society’s strong support, Congress has stepped forward with new funding to address the problem, including $90 million in the Forest Service’s FY 2010 budget for urgent road decommissioning and repairs.

    Since creating the Legacy Roads and trails Remediation Initiative three years ago, Congress has appropriated $179.4 million for this work. This funding source will create or retain green jobs protecting water quality and enhancing wildlife habitat by obliterating unnecessary old roads, performing critical maintenance on important roads, and maintaining culverts. With so many excess old logging roads, determining which ones receive maintenance funding can be difficult. Funds can also be used to perform the travel analysis necessary to determine which routes are unneeded, and the environmental review that is required before such work can begin.

    Click below to see the complete document.

    File Attachments:
    legacy-roads-and-trails-fund.pdf
    http://wilderness.org/files/legacy-roads-and-trails-fund.pdf

  16. Eyes open

    October 26, 2010 at 1:39 pm

    Sorry to inform you Mark, but native Eucalypts are now included as a specialty timber son.

    Small country sawmills collapsed because of the change to the industry driven by a few, which in fact had many country sawmills unable to source a resource from the local regions, many had to cart across the island – all the while the forests around went to chip. I can tell you because I was pulling the splinters out of my hands.

    “…have destroyed a sustainable, excellently managed resource in Tasmania; have destroyed the livelihood of thousands of Tasmanians and their families; have sentenced many vibrant towns in our state to a slow and painful senescence”.
    Sorry again matey your skewed insertion of your own reality needs a check here, it has been the Plantation and native woodchipping industry that destroyed an industry some of us WERE once proud of.

  17. Mark Wybourne

    October 26, 2010 at 1:02 pm

    Re # 35. Russell. Why can’t you understand that, in essence, there will be NO native forest resource available within a few short years?

    Towns will close down.

    Communities will disintegrate.

    Working age people will flee the state and be partly replaced by retirees.

    Job well done!

    Pat on the back!

  18. MArk Wybourne

    October 26, 2010 at 3:23 am

    RE # 31. Brave words Mark. Also extremely insulting.

    Prove your statements, or it may be more sensible to stick to comments on your own little blog spot.

    By the way, you like travelling aroung the state on forestry roads. Will you be disappointed when they are closed for safety reasons, soon after the “principles” come into effect.

    I mean, it is a certainty that Gunns will close all its road straight away due to the threat of litigation … so goodbye Wielangta Road again … for good this time. Now there’s some proof that Gunns had no idea about this deal, otherwise they would not have committed money and time repairing the bridge that the general public had used so much it became unsafe.

    It’s aheck of shame really, as I always enjoyed looking at many of your photos. Oh well, maybe you could take urban shots.

  19. Russell

    October 26, 2010 at 1:17 am

    Re #24 and other rantings.
    We’re talking about now AND the future, Mark. A future which would be much brighter without Gunns and FT in the picture because it would mean there will then be a very good chance of having a highly valuable resource there infinitely to support a highly profitable and sustainable timber industry.

  20. Steve

    October 26, 2010 at 1:06 am

    #30; What rubbish Mark. The writing’s been on the wall for a long time. How far do you have to go back to see that public opinion has always been against wood chipping native forests.When was “Rip, rip, wood chip” written”?
    As for saw logging native forest, you clowns have only yourselves to blame. You nailed your colours to the mast. “Greenies are evil”, “Woodchips are good”.
    The editor wouldn’t allow the language I’d need to use to properly express my disgust at what you’ve done to what should have been a vibrant Tasmanian industry, producing a product that Tasmanians could take pride in, whilst pumping employment and profits back into local communities. Yet here you are still, banging on about it all being the fault of the Greens. Have you no shame?

  21. john hayward

    October 26, 2010 at 12:45 am

    Might I ask Mr Wybourne, #23, why society should lavishly pay a logging company to desist from further plunder of a public resource and natural environment which society owns?

    John Hayward

  22. William Boeder

    October 25, 2010 at 11:54 pm

    #30. Mark Wybourne, you continue with your prattles in kind toward the Greatest Greediest Forest Predator and their help-mates, in Tasmania’s pre-glorious life-time, then in your crude stealth manner, to slip in a few poisonous darts to those who want to see our forests remain in the vertical?

    A major component of the recent shift as you describe it, is as a result of the false, the misleading, the outright ignorance to sound business practices, this is what has come to the fore.
    This is what the collective of Gunns Ltd and Forestry Tasmania are renowned for, also there is the glutting-up by them upon the State’s media, the owners of which seem too frightened, (or maybe perhaps are too involved in to call a spade a spade?
    The present forestry management hierarchy, they of whom were unfortunately trained by their predecessors, Lennon, Rowley and Co, with the expert polished-up finish provided by the then prior minister for everything, David Llewellyn?

    (Remember the big false spiel of year 2007, “no more Native Forest conversions”?)

    Then we look to the present forestry minister in Bryan Green, this man is not known for his concerns to be much else outside of pumping up the slaughtering of our forests or sending our Native Timbers off-shore for whatever crumbs might be had?

    The current forestry industry management cabal verily still contains all of the elements of their obscure and cloaked-over evil purpose, ever to be part of any forestry shystering circumstance.
    Is it with any wonder that the wrath of the State’s people was so cast upon the nefarious and dodgy behaviours of whatever constitutes a forestry industry, led by the pair of serial offending plundering operators, in Gunns Ltd and Forestry Tasmania.

  23. Mark Wybourne

    October 25, 2010 at 9:45 pm

    Re # 27. Amy. With repsect (and a little bit of surprise that such a statement would be made), you are incorrect. Check out the past bragging of Geoff Cousins, Bobby Brown & Co, the TWS and so on and son.

    I will assume your retraction as a given once you have gone through the history. As I have stated before (where the ‘moderators’ have not deleted it, te crisis that people and communities are currently gong through is primarily a result of the the Green movement,

    Re 28: What are you talking about plantation for? Read more carefully – I am referring to the massive social and economic impact (to individuals and communities) that will occur with the cessation of native forest harvesting. And don’t refer to Specialty Timber. The total volume of that will just about fit into a Giant’s thimble.

    In addition, the ‘history’ you have selected to highlight will simply reinforce the point I was making, to the average reader. That is, the shift from community support of native forest harvesting to community angst with native forest harvesting has occured within a relatively short time frame.

  24. Charles and Claire Gilmour

    October 25, 2010 at 6:37 pm

    (23) Mark Wybourne said “Gunns Limited deserves compensation due the significant (and sudden in relative terms) paradigm shift that society has requested.”

    ‘Sudden paradigm shift’? Relative to what terms? Their plantation based plan B? How quickly they could take over other plantations? Relative to big investor requirements may be. They got what they have been spruiking for some time, but they want their cake and to eat it too.

    2009 Sept 21 “When Gunns announced its after tax profit of $56 million this year, the company also revealed plans to secure timber to ensure the pulp mill will be 100 per cent plantation-based.” (ABC – Gunns moves on Timbercorps plantations)
    http://www.abc.net.au/news/stories/2009/09/21/2691752.htm

    … evidenced by their takeovers.

    2010 Jan 5 “Tasmanian timber giant Gunns says taking control of nine plantation schemes is a significant step for the company. Gunns had already taken over the 1998 to 2005 schemes. Gunns Chief Executive Greg L’Estrange says the move shores up timber reserves for Gunns proposed Tamar Valley pulp mill. “I think that we are showing that people who understand the business of growing plantations recognise Gunns’ ability and history and this is a significant endorsement and we’ll build on that through the year,” he said. (ABC – Gunns secures plantation scheme)

    … indeed they have been ‘trying’ to build and capitalise on being plantation based for some time.

    2010 Jan 6 “Tasmanian timber company Gunns has announced its proposed Tamar Valley pulp mill will use plantation eucalyptus from the first days of operation. Gunns revealed last year that it was negotiating with a potential Swedish partner, but Sodra will only invest if the mill is 100 per cent plantation-based, chlorine free and forest stewardship certified. Chairman John Gay says Gunns’ recent takeover of timber plantations from Great Southern will allow it to supply the pulp mill solely with plantation timber, five years earlier than planned.” (ABC – Gunns mill to chew plantation timber from day one)

    …. but Gunns are greedy ….

    2010 Jan 7 “ The Tasmanian Premier has challenged environmentalist and the Greens to accept Gunns’ proposed pulp mill, now that it will not use old-growth timber. Gunns says it still needs its wood supply deal with Forestry Tasmania, even though its proposed pulp mill not use native forest timber. The deal commits about 1.5 million tones of pulpwood to Gunns each year for 20 years. (ABC – Premier urges end to anti-mill campaign)

    … and why not when the Tasmanian Government and their business enterprise Forestry Tasmania will continue to pander to their whims….

    2010 May 17 “In a statement, Gunns Chief Executive Greg L’Estrange says the native forest blocks are surplus to the company’s requirements as it moves to a plantation based business. (ABC – Gunns land sale)

    …. Obviously FT haven’t been listening, otherwise they wouldn’t have extended the 20yr wood supply agreement late last year. They should have, at least, re-negotiated so it did not include native forests. For aren’t they also ‘surplus’ in Gunns desire to be plantation based? (there’s only two reasons to want to keep a hand in that deal and that is they want the option of selling native forest woodchips to some shonky overseas backwater and/or burn native forests to help power their pulp mill and they want the public to keep paying them). It seems Gunns have inadvertently already broken their side of the agreement by their public comments.

    So we the public pay them to help cripple any decent industry; pay off the contractors, many of whom really should have been deemed employees and therefore paid off by Gunns rather than the public; buy out an ill-conceived contract, a public owned resource that Gunns essentially have suggested, for some time, they don’t really need anymore. And to add insult to injury neither the government nor Gunns have allowed any legal recourse, natural justice to citizens (not employed by the industry) who may be negatively affected by any of their operations.

    Goodwill and Gunns are diametrically opposed for isn’t goodwill generally earned by a good public reputation … something Gunns haven’t been able to buy. What’s it worth? Gunns needs the public … so far they haven’t proven we need them.

  25. amyb

    October 25, 2010 at 5:16 pm

    Re #23 – Then let the Japanese pay, Mark. It’s their society that demands FSC certification for raw materials used in their paper manufacture which drove this.

    The wishful thinking that somehow a band of conservationists from Tasmania caused this to happen is simply delusional thinking, and you know it.

    The wishful thinking that Gunns takes any notice – or even cares, for that matter – of what Tasmanian society wants is even more delusional thinking.

  26. john lawrence

    October 25, 2010 at 4:54 pm

    William (#18) just a few points.

    ACCC wasn’t required to consider Gunns’ solvency.

    It determined there was only enough softwood resource for one mill so therefore Gunns’ acquisition of FEA’s mill would not lessen competition and was given the green light.

    ACCC’s “inquiries indicated that the available sawlog volume of softwood sawlog was significantly less than the total installed sawmilling capacity in Tasmania and was expected to decline further in the foreseeable future.”

    From memory the people largely responsible for the softwood resource are the same people who have offered their services as honest broker to resolve the forestry crisis.

    We’re in safe hands.

    The Gunns’ Board carefully considered its going concern status and concluded it would be able to keep going via sales of non core assets. Among these are softwood plantations of $88 million and possibly ( this is my guess only) $119 million of hardwood sawmill inventory.

    The FEA mill’s sale price is rumoured to be $40 million.

    Negative cash flow refers to ‘operating cash flow’. Asset sales form part of ‘investing cash flows’.

  27. William Boeder

    October 25, 2010 at 4:39 pm

    I ask the question to all that attend this Forum, those in favor of, and those not in favor of:
    Currently there are many suggested ways and of timelines being discussed, to which date or even week, is considered the best time for the absolute halt, to all milling processes, treatments, “including wood-chipping of Native Forest product,” by Gunns Ltd, to comply with their ASX announcement?

    To read of such that a wind-down time is necessarily required, seems to suggest to me, that in this single item only, that it will be when it suits Greg L’Estrange and or Gunns Ltd?

    There are so many media statements, rumours, pro-forestry-push claims, maybe even some ill-insinuated State government spin-message or innuendo that it must be or might be ‘soon’?

    Thus you may now view my concerns that this matter in itself has still not yet been identified as any date-time specific?
    Thank-you.

    William Boeder.

  28. Mark Wybourne

    October 25, 2010 at 2:49 pm

    Re #20. Read my post.I am talking about the future, not the current.

    Re #21. Read my post. Specialty Timbers constitute very low volumes. They are not eucs. I estimate that a maximum of 10,000 cubic metres may be available for the first couple of years, and then much less as roads degrade and are not maintained. An industry that size will not support road construction / maintenance EVEN if timber value increases 10 fold.

    (Those conservation-oriented campaigners) have destroyed a sustainable, excellently managed resource in Tasmania; have destroyed the livelihood of thousands of Tasmanians and their families; have sentenced many vibrant towns in our state to a slow and painful senescence.

    Well done.

  29. Mark Wybourne

    October 25, 2010 at 2:30 pm

    Re : #22

    Eloquently incorrect again, Mr Hayward.

    Gunns Limited deserves compensation due the significant (and sudden in relative terms) paradigm shift that society has requested. A request that has been accelerated by the ENGOs whom have done a sterling job in meeting their objectives.

    Simple translation, if you want something bad enough, then you have to pay for it.

    PS Have you interest in selling / leasing some of your farm for plantation development – exotic softwood, 32 year rotation, good lease rates available. I promise that it will only be sprayed twice in the 32 years. If keen, let me know and I will facilitate the process for you.

  30. john hayward

    October 25, 2010 at 1:17 pm

    Despite decades of deception and mendacity, many posters still seem to take Gunns’ statements seriously.

    As a self-acknowledged business failure, Gunns would have no claim on $200,000,000 in compensation, nor on the Wood Supply Agreement, nor on the right to assume ownership of FT roads and land in mill door zones, all of which they could arguably enjoy under existing legislation in Tasmanian courts.

    There is more than one way to skin a Tasmanian than by conventional business success, and Gunns looks to have ways to sell the extravagant legal privileges gifted to the woodchip industry over the years.

    John Hayward

  31. William Boeder

    October 25, 2010 at 11:08 am

    Mark Wybourne, you are missing the point, or you are creating nuisance, access to the Native Forests for Speciality Timbers will be permitted, tis just a matter of who?
    Can Forestry Tasmania be trusted in this, well that’s a whole different matter?
    Tis fair to suggest, their track record of due care and responsible conduct is not known to favor anyone other than themselves.

  32. Russell

    October 25, 2010 at 10:36 am

    Re #19
    Do you now?

    Well, you can answer this then.

    If there isn’t even enough hardwood “to sustain one average hardwood sawmill”, then how was it ever going to sustain Gunns? OR, are you saying that Gunns and FT have depleted the hardwood stocks in our forests that much?

  33. Mark Wybourne

    October 25, 2010 at 3:06 am

    Re 11. Actually, Russell, I obviously understand it better than you. The amount of specialty timber produced would be unlikely to sustain one average hardwood sawmill.

    The specialty timbers referred to are essentially for craft wood, maybe going as far as small boat material. They are not Eucalyptus.

    Re 12: Justabloke. Too late, in my honest opinion – the horse has bolted. There is no way that the NGOs (and the latte public in general) will allow that to happen. The big concern is that you are also talking about re-inventing the wheel and causing the silviculture of the native forests to become very poor.

  34. William Boeder

    October 25, 2010 at 2:18 am

    A question here for John Lawrence, if you could kindly oblige me in responding to my question?

    Considering the relatively ‘new’ saw-milling operation and equipment of FEA, how could Gunns Ltd be able to access this ‘relatively new equipment’ operation with its present negative cash-flow?

    I note your particular comments toward the number 2 issue, where you indicate: that Gunns Ltd are keen to sell off their ‘old’ hardwood processing facilities?

    I find myself baffled as to how an almost insolvent Company such as Gunns Ltd, could purchase, or even merge, with the FEA business, (itself in the hands of the receivers,) yet this proposal has been given the go-ahead by the ACCC Merger/Acquisition Executive?

    Thanks,

    William.

  35. The Tipster

    October 24, 2010 at 10:46 pm

    Reports are coming in that TWS ‘friends’ are trying to shut community members up at the coming round of ‘meetings’.

    That sounds like evidence of bad faith – haven’t these NGOs done enough to set the community offside?

  36. Mark

    October 24, 2010 at 9:08 pm

    #4 Please refer to an article I wrote some time back:
    http://oldtt.pixelkey.biz/index.php?/article/sister-states/
    Too many Tasmanian forestry reps like to use Malaysia and other southeast Asian countries as examples to promote “our best practice.”

    As you read the quotations from their media please relate to the rhetoric used in Tasmania over the years. The direct parallels are, indeed, insightful.

  37. salamander

    October 24, 2010 at 8:46 pm

    At least Gay and Grey, two of the worst “aging inefficient assets” have gone.

    What are the odds on Greg the Strange getting his bonus? doesn’t look good.

  38. Observer

    October 24, 2010 at 8:40 pm

    #9. The good news is that E. Nitens are excellent for timber use. The timber can be used as structural grade, with impregnation, in ground and marine and it is suitable for flooring and joinery.

    The merchants I bought the euphemistacally named ‘EcoAsh’ (e.nitens) think that it is absolute rubbish. My own experience with using the stuff confirms this. It is certainly not a hard wood and to keep it straight, it has to be stored in the shade and watered EVERY day. I made a mistake of leaving a couple of pieces out in the sun and within a couple of hours it had warped and twisted so much that it was unusable.

    It you want decent wood, other than pine, it costs a fortune and is difficult to find. Yet we see tons of the stuff split and disappearing to the chippers on a daily basis. Four and half million tonnes a year wasted!

  39. Justa Bloke

    October 24, 2010 at 8:15 pm

    Perhaps, Mark (#4), there should be another round of talks: this time among those of us who want to see Tasmanian trees used for timber, not for woodchips. The few sawmillers who are left, those of us who are anti-plantations and anyone else with an understanding of the role of trees in a carbon-conscious era (even George). Of course they shouldn’t be held behind closed doors. Everything must be transparent and open to the public.

  40. Russell

    October 24, 2010 at 7:54 pm

    Re #4
    Access to the forests for “specialty timber” hasn’t been closed at all, Mark. How little you understand of anything and all.

    Without Gunns and FT hogging and wasting the lot, there will be structural and specialty wood for everyone else who previously were kept out of the resource.

    However, while Gunns and FT remain in the picture the resource is doomed to oblivion, reinforced by the fact that bugger all large logs have been coming out of there for ages and everyone having to retool for the smaller diameters.

    Without woodchipping in the mix, the industry is VERY sustainable.

    re #7
    Maybe Karl, but I think only as an unforeseen bonus. I think GREED was the prime motivating factor. Just look, they are buying FEA even though they have stuff all cash. Too many eggs in one basket(case) I think. Scottsdale was always going to be closed and, as they said on the news the other night, the soon to be ex-employees feared that from the time of the take-over.

  41. Bob McMahon

    October 24, 2010 at 3:55 pm

    Bloody right Russell. The ENGO’s will get theirs this week.

  42. David Leigh

    October 24, 2010 at 3:55 pm

    It is inevitable when you see three out of four woodchipping companies go to the wall, despite being given a free ride by the State and Federal Governments.

    Gunns’ share price has fallen by 87% in 3 years and, apart from a blib in the graph, following a false statement about the Tamar Valley pulpmill being back on the table, will likely fall again.

    The good news is that E. Nitens are excellent for timber use. The timber can be used as structural grade, with impregnation, in ground and marine and it is suitable for flooring and joinery.

    The future for small business in the forest industry looks promising, with all that plantation stock available when the inevitable happens.

    There is finally hope for a job creating, ecologically and finacially sustainable forest industry in Tasmania.

  43. Ali

    October 24, 2010 at 2:32 pm

    More fine forensic work by John demonstrates the dodginess of the entire forestry ‘business model’.

    There seems little doubt that the idea has been to use forestry activity as a cover to relieve taxpayers of their resources (land, water, forests and money) under the guise of creating jobs and realising economic benefits by doing something with trees – like eliminating them.

    In the earlier days, the extent of this wasn’t so obvious. But Gunns balance sheet over the last few years has showed a progressive decline in profits, and a growing reliance upon MIS and other government payments. The losses were not surprising given the steady decline in world pulp prices and the increases in costs of energy and transportation.

    When MIS collapsed (in part because the annual returns from growing pulp wood trees were so low), Gunns profits collapsed along with it.

    Their strategy has been to sell off any component of their business that looks like it could add value – building, wines, hardware etc. leaving themselves to be totally reliant upon getting a pulp mill up and running.

    As a consequence, their remaining strategy is likely to be to throw themselves on the mercy of the government by claiming that a new ‘sustainable’ model has been developed and they just need a billion or two to get over the rough spots at the beginning.

    Enter the Round Table and a group of naive NGOs who signed up to ‘develop a strong sustainable timber industry’. Why they wanted to participate in saving Tasmania’s unsustainable forest industry is yet to be revealed.

    The Lib/Lab/Greens might support the resulting line of ‘sustainable’ PR tosh if they can fantasise that the social licence is there so that they can believe that they won’t lose too many votes by subsidising Gunns and a pulp mill.

    The NGOs are promoting the deal right now so it looks like the Greens will press for creating ‘…a strong, sustainable timber industry’, thus playing into forestry’s hands.

    That would put all 3 ‘representative’ political parties supporting the industry, no opposition and hence direct access to the public purse.

    We can see this all unfolding right now.

    The need is established (Gunns almost broke, contractors almost broke, too many plantations to count, threat of jobs lost).

    The benefits are being drawn up (jobs, sustainable industry, carbon credits, untold riches, everyone employed at the pulp mill)

    Breathless reporting (conflict over, unprecedented success, sustainable forest industry, environmental support, new face at Gunns, jobs – jobs – jobs, peace and love in our time)

    Now it’s a question of trying to stay awake while the various actors sincerely explain why we’ll all be better off by supporting Gunns instead of having better hospitals, roads, rail, schools and so forth.

  44. Karl Stevens

    October 24, 2010 at 2:24 pm

    I think Gunns were taking-over failed MIS schemes only to signal to the Federal Government they were a responsible corporate entity. In return they would expect more favors from the Feds. The Federal Government would see Gunns as a protector of taxpayer-funded assets. In other words, the Gunns strategy is to develop a partnership with the Feds just like they did with the State Government in the Lennon era. The result would be a steady cash flow from Canberra that was both within and outside normal business operations. For example, if the Federal Government pays for a $60 million autobahn to your aging wood chip mill, then you don’t have to declare the road an expense or an asset, but you still have the use of it. I’m guessing the net tax liability of Gunns would be small. They may recycle a percentage of our tax dollars as ‘tax’ but the amount would be laughable.

  45. mike seabrook

    October 24, 2010 at 1:36 pm

    Gunns’ Auspine debacle

    my thoughts – not a debacle at all for gns pre-existing shareholders & gnspa holders as gns shares were issued at north of 60c to pay for it. – ie. value added.

    would appreciate thoughts on gnspa, should gns survive. – do gnspa holders get a veto vote which can stymie any re-organisation, which could cause a buy out.

    MIS holders went into this tree (& other agricultural) farming themselves – eyes wide open – no-one other than themselves to blame. gns is only applying black letter law to mis contracts.

    – as to the issue of alleged (im)proper/(in)correct representations made & alleged improper/inept/incompetent/dodgy management practices re MIS by gns ( & gtp, tim, fea, wfl etc) & the banks/financiers, will watch developments with interest.

  46. max

    October 24, 2010 at 1:01 pm

    Gunns claim that they are going out of hardwood sawmilling, let them. Gunns have had a poor history as far as closing down small sawmills and forcing closures by denying access to wood supplies. Since the rampant slaughter of native forests for wood chips, the small sawmills, the big employers in the forests have declined and perhaps Gunns leaving the hard wood industry will be a return to the more sustainable and higher employment of former years.

  47. Mark Wybourne

    October 24, 2010 at 12:57 pm

    Re # 2: Do you not understand what the ENGOs have just orchestrated Russell. There will be no ‘void’ for former sawmills to fill. There will be very little (if any) native forest hardwood in Tasmania available for sawmills. They will NO chance of reopening, except maybe if they send their equipment to Indonesia, Malaysia, PNG etc.

  48. William Boeder

    October 24, 2010 at 12:38 pm

    The supposed highly sustainable and at the time supposed enormous benefits from the forestry industry to Tasmania’s economy, was much trumpeted, just before the almighty collapse of the MIS Ponzi rort.

    In an email letter sent to Gunns Ltd by myself at the time of collapse of the major MIS companies,
    I stated that this shutdown or sudden halt to the incoming money of this MIS schemery, (or better described as ‘the funds committed by so many others’) would cripple their income levels, also that of their trumpeted mighty management successes.

    Naturally, no reply was offered to this sage observation, as it was sent by somebody without any “formal high level status or surplicity of university degrees?”

    My point I wish to declare here is this: if such as myself, considered by them, as a non-industry related individual, (also as would be determined by themselves,) “an unqualified alien to their cause individual,” could safely predict the enormous drop in Gunns Ltd operating revenues, (they no longer having access to other people’s money,) thus the resultant plummeting income levels to this poorly managed, supposed timber industry giant, THEN the matter should have been better understood by the company directors and highly qualified executive lay-abouts on Gunns Payroll?

    Under these former John Gay plotted bold strategies and accesses to government grants, (for this that and whatever else,) was how this “mighty stock-market listed-darling of the bourse,” was able to keep ite fantasies alive?

    Now some 3 years down the road of this “totally unsustainable and false forestry industry management system,” we see the poor resultant state of affairs of this company?

    Do remember all the unsupported waffling by the then Federal Forestry Minister, a certain Senator Eric Abetz, at that time, busily pumping-up all that would never realistically arrive, of a vibrant and highly sustainable industry creating huge wealth for Tasmania?

    Strange it is that we have still in our midst, this engaging Liberal Party Senator/prophet of wealth and success, yet still plying his trade as though he is a man possessed of unique and formidable greatness?

    Oh what a demon is that visitor who dare comes to the Abetz front-door, bearing the truth of such superficiality and concocted garbage rantings to the very door of its creator.

  49. Russell

    October 24, 2010 at 11:43 am

    Let the bloody disaster fold.

    What’s the point in pissing more and more money up against the wall?

    I bet the former sawmills will JUMP at the chance to re-establish and fill the void, and honorable sustainable sawmilling jobs will be emerging EVERYWHERE in the countryside without Gunns and FT in the picture greedily taking and wasting the lot.

    Let the market dictate without any more Government intervention. The ENGOs will get theirs this week.

  50. Observer

    October 24, 2010 at 10:30 am

    Gunns owns about 65,000 hectares of hardwood plantations in Tasmania, mostly on its land. There are a further 106,000 hectares of Gunns MIS schemes, again mostly on its land, and a further 7,400 hectares of Great Southern’s plantations here in Tasmania which Gunns are now ‘managing’. The latter are of dubious quality if the 800 hectare Temma plantation is any guide.

    ‘Both Gunns and Elders have been reported as saying half of the current national estate of 800,000 to 900,000 hectares won’t be replanted.’

    ‘These assets are now a crappy pile of junk…..And then they’ll probably exit the industry with their share,85% to 95%, of whatever remains. Who’s going to replant? More Government assistance?’

    Thanks for those shrewd observations John. It clearly shows what a load of codswallop we have been fed by Forestry when they tell us that their industry is ‘sustainable’ and that the old carbon that they harvest is instantly taken up by the new plantations. If Temma is a good example of this, then there is virtually no uptake, and even that is due to be reharvested and lost after 13 years, which means 400 year old carbon-dense trees are being slaughtered for a few measly saplings, which take thirteen years to approach anything like the volume they are supposed to have replaced, and then they themselves are slaughtered with only a fifty percent chance of being replaced.

    This is a fraud by anyone’s standards and is similar to the MIS Ponzi type philosophy.

    Further, this is supposed to be the feedstock for Gunns pulpmill, but it looks as though they are having trouble managing even this, their basic asset, so how will they ever manage a complex pulp mill? And incidentaly, even though they ‘manage’ these swathes of plantations, they don’t own the timber tht is grown on them. That they will have to pay for on harvesting and I don’t think that appears in their accounts. If the harvest is low, then the price per tonne is huge, and that is the basic feedstock for the mill. How on Earth can they compete against places like Brazil?

    Even a $1.2 billion ‘compensation’ handout appears unlikely to save them, and also fairly remote if anyone in Treasury takes a hard look at their accounts. The ‘Jobs’ myth no longer has much weight since they have closed Scottsdale and the WA sawmills. Is this the ‘goodwill’ they are showing that is valued at $60 million?

    From an investors/partnership point of view and from an ability to manage, it looks like Gunns and Forestry, hand-in-hand, are merely two dead men walking!

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