C.T.P. keeps looking for expansion

Press, 15 July 1980, Page 18

C.T.P. keeps looking for expansion

The good progress made in the last few years is not breeding complacency at Canterbury Timber Products, Ltd, and the company continues to examine potential directions for expansion. These include the examination of the economics of an expansion of production from the Ashley mill by the elimination of bottlenecks. The chairman (Dr O. F. Haylock) says in his review that the improvements in chip storage and handling facilities brought about by the installation of the “Wennberg” outside chip storage system have eliminated a constraint to increasing production, fully justifying the capital cost involved. For the year under review expenditure on capital works totalled $827,000, including the provision for the Wennberg system and other facilities to increase production capacity. It was also decided to erect a second mill, and the location chosen was central New South Wales, where a suitable wood resource was located near Tumut. An option over this resource was granted to C.T.P. in December, 1978, by the N.S.W. estry Commission. During 1979, the project was developed through the stages of preliminary surveys and studies, a comprehensive feasibility study to a detailed proposal. Recognising that a venture estimated to cost in the order of $3O million was beyond the ability of the company to absorb at this early stage of its development, an approach was made to A. V. Wehl Industries, Ltd, a subsidiary of Australian Consolidated Industries, Ltd, to join the venture. . Agreement has been reached to proceed on the basis of C.T.P. possessing al 25 per cent shareholding of 1

the company Laminex Customwood Pty, Ltd, which will erect and operate the 200 tonne per day mill at Wagga Wagga. C.T.P. will be technical manager of the project, and will be responsible for the design and specification of the production facilities. It is expected that the major contracts for supply will be finalised this month, and that the plant should be in commercial production by early 1982.

The directors consider that this association with A. V. Wehl which has an outstanding reputation for marketing panel products in Australia, will be of great value to C.T.P. in the future. The funds required for the C.T.P share of the equity capital ($N.Z.3,000,000) have been provided from cash surpluses already accumulated from trading. Forward exchange cover has been arranged for the total equity contribution.

As announced, net profit rose 62.8 per cent to 52.6 M in the year ended March 31, after an 'increase in revenue of 41.9 per cent to $15.8M. The profit was after providing $420,645 more for depreciation at $1,480,941, and a deferred tax provision of $588,157. Interest on debentures, at $644,363 was $106,691 less than last year, and realised exchange losses, at $11,775, comoared with $137,142. Because of CTP’s profitable trading the necessity for borrowing on a bill line vanished and this expensive form of finance was discontinued. Total debt overseas is now only $U565,000 and is due for repayment this year. The company thus avoided the problems associated with the continuing weakness of the NZ dollar against many loverseas currencies.

From the net trading profit of 53.2 M (SI.BM) CTP wrote off $100,600 against commissioning and preproduction costs in the latest year ($56,981 last year). The 18 per cent dividend is covered 2.8 times by the profit; the earning rate on shareholders’ funds is 26.7 per cent. “After the dramatic per-' centage increase in export sales last year some levelling off in increased activity might have been expected,” says Dr Haylock. But the further rise was forthcoing and demand from established export customers, like domestic sales, is continuing at high levels. “The policy is to develop long term stable contracts for export within our capacity to produce board. “A feature of the current worldwide supply position is the inability of many medium density fibreboard and particleboard plants in the United States to obtain adequate wood and wood waste for processing. From reports received, this state of affairs is likely to exist for some considerable time.”