Economy
Government must come clean on support for Gunns
Premier Lara Giddings must come clean on what financial support her Government has promised timber group Gunns, a Tasmanian analyst said today.
“With Gunns’ financial position deteriorating and at risk of breaching banking covenants, this State cannot afford to jeopardise its own financial position by propping up another struggling private enterprise,’’ Tom Ellison said.
“Gunns’ headline loss of $5 million understates their true financial position,’’ Mr Ellison said.
“Incredibly, Gunns has inflated their earnings figures by revaluing the Bell Bay sawmill upwards by $19 million, despite the mill being sold as a result of a transparent tender process, and even though Gunns did not own the asset at the end of the accounting period.’’
Gunns has also confirmed compliance with debt covenants will rely on the success of ongoing asset sales.
“With Tasmania already facing serious Budget deficits and public service cuts, it’s hard to comprehend how a Government could even contemplate providing financial support for Gunns,’’ Mr Ellison added.
“Gunns’ pulp mill is without final approvals, a joint venture partner or a financier, yet the Premier continues to support the project.’’
“The taxpayer deserves to know whether she has committed any further funds to Gunns.’’
Tom Ellison is General Manager, Wills Financial Group Pty Ltd. Wills Financial Group is an independent, Tasmanian-based advisory and research firm specialising in ethical investment strategies.
First published: 2011-02-15 10:17 AM
Business Spectator:
Gunns posts first-half loss, confident on pulp mill
Published 11:01 AM, 15 Feb 2011 Last update 12:27 PM, 15 Feb 2011
By a staff reporter
Tasmanian timber group Gunns Ltd has swung to a half-year loss and has yet to declare a partner for its multibillion-dollar pulp mill in Tasmania, but directors expect the controversial project will go ahead.
For the six months to December 31, 2010, Gunns reported a net loss after tax of $4.6 million, versus a $420,000 profit in the previous corresponding period.
Gunns, which has promised a move out of native-growth forests, said group revenue lifted 11.5 per cent to $363.4 million over the previous corresponding period.
But earnings before interest and tax fell to a $5 million loss as asset impairments and provisions on sold or closed business came in at $41.3 million. Restructuring costs were also $4 million, while asset divestments losses were $4.1 million, Gunns said.
It did not declare a dividend.
Gunns said market conditions for its wood-fibre business are “expected to remain difficult while the strength of the Australian currency against the US dollar is maintained.”
“Earnings from sawn timber operations are expected to increase in the second half of the 2011 financial year, with the integration of the Tasmanian softwood operations to one site at Bell Bay and further rationalisation of hardwood operations,” the company said.
Financial analyst Matthew Torenius told the ABC that Gunns was battling the high Australian dollar, and would focus on plantation sales over the next six months.
Gunns added that while forecasts of profitability and cash flow indicate that all debt covenants will be met over the next 11 months, the “timing and value of the remaining asset sales are critical to achieving this outcome.”
At 1226 AEDT, shares in Gunns were down 1.92 per cent to 51 cents, against a 0.12 per cent decline in the …
Read the rest on Business Spectator, HERE
GUNNS RESORTS TO SMOKE AND MIRRORS TO DISGUISE FINANCIAL WOES
Company Cannot Be Trusted
Kim Booth MP
Greens Forestry spokesperson
The Tasmanian Greens today accused Gunns Ltd of resorting to smoke and mirrors in an attempt to understate the company’s true financial position for the half year ending 31 December 2010.
Greens Forestry spokesperson Kim Booth MP said the accounting trickery which sees Gunns Ltd posting a $4.6 million net loss rather than the closer figure of approximately $23.4 million, yet again demonstrates why the community views the company with growing suspicion and distrust. [1]
“Gunns Ltd needs to cut its losses and run from the white elephant which is their controversial Tamar Valley pulp mill project, and stop trying to con the Tasmanian community,” Mr Booth said.
“The smoke and mirrors used in these half year figures clearly show that Gunns is desperate to pretend it is in a better financial position than it actually is, and that the company cannot be trusted.”
“Gunns’ trail of deception continues with this latest round of accounting smoke and mirrors, which sees the company writing up the purchase of another operation and revaluing it as profit to make their accounts look more robust.”
“Put simply Gunns Ltd’s suspension of trading, provided the company with the opportunity to revalue the purchase of the FEA Bell Bay mill, effectively inflating their earnings figures, although that take-over was not completed during that period of time. This enabled Gunns to turn around what should have been a loss in the vicinity of $25 million to only an approximate $5 million net loss.”
“This is an outrageous piece of chicanery clearly contrived to deceive the market. People should not be fooled.”
“It defies common-sense that State Labor supports this mendicant company, which continues to demonstrate such contempt not only for the Tasmanian community but also towards its own contractors.”
“The Greens have warned Labor that any attempt to underwrite Gunns’ proposed Tamar valley pulp mill will be unacceptable to the community.”
Mr Booth also expressed concern that ASX appears to allow this practice of companies booking profit on acquisition to prop up their bottom line.
[1] Note: Gunns’ statement to the Australian Securities Exchange of today refers to a gain on purchase of the FEA mill of $18.8 million, which added to the reported net loss of $4.6 million totals $23.4 million.
• Dr Alison Bleaney, BreakO’Day Catchment Group and TPEHN:
Mr G. L’Estrange,
CEO Gunns Ltd,
78 Lindsay St., Box 572
Launceston, Tasmania 7250
15 February 2011
Dear Mr L’Estrange,
This is in reply to your letter of 25 January 2011. (On TT, HERE)
I appreciate your offer to be appraised of Gunn Ltd’s strategic direction in the global forestry and wood products market.
However as long as these plans include a pulp mill for Tasmania with eucalypt plantations as it’s feedstock, then the following points need to be explicitly addressed:
• the problems associated with pesticide use in plantations including surface water and groundwater contamination and the harmful effects of aerial spraying toxic pesticides. FSC certification of plantations will not address these problems.
• the impact of the toxic products released by large acreages of monoculture exotic eucalypt plantations on ecosystem health and water quality.
Perhaps you make like to contact us again when these points have been addressed and some headway is made with solutions to these problems.
Yours sincerely,
Dr Alison Bleaney OBE
MB ChB FACRRM
Spokesperson for BODCRG
• Dear Ms Gillard …
