Winstone shares fall sharply

Press, 13 February 1981, Page 8

Winstone shares fall sharply

More than SBM was knocked off the market capitalisation of Winstone, Ltd, in a bout of panic selling yesterday morning on New Zealand stock exchanges. At one stage the shares sold at 50c, a fall of 32c and less than two thirds of the market price of 82c on Wednesday. News of Winstone’s financial problem broke on Wednesday after the sharemarket had closed for the day, anc in fact, the Winstone share price firmed 2c on Wednesday afternoon. Yesterday morning the market knew that the Winstone directors' had been meeting since 8 a.m. and it was confidently expected that a statement would be made in time for the commencement of trading at 10 a.m. When the statement was not forthcoming, a wave of selling orders hit the market, particularly in Auckland. However, as the morning progressed, bargain-hunters began to move in, and before,' the close of morning I trading the Winstone share price .had moved back to 62c — a drop of 20c on Wednesday’s close. The Winstone directors made a statement at 2 p.m. yesterday afternoon in

. which they said that, although there were problems with the Karioi pulp mill, trading of traditional group activities was satisfactory. The shares recovered another 3c in afternoon trading to close at 65c —17 c less than the closing price the day before. The full text of the statement was: “The Winstone group has nreviously indicated that difficulties were being experienced with its Karioi Pulp Mill, and that the group was having discussions with various parties concerning a possible restructuring of the mill. “Talks are continuing and include discussions with the Government in respect of the dramatic increase in the cost of electricity, which is a substantial component of the operating costs of the mill, and the level of export incentives. “Unfortunately these discussions have led to unexpected speculation in the media about the financial position of the Winstone group as a whole.” Th.e group announced on December 4 that it had made a consolidated profit of $2.05M for the half year ended September 30 — after taking into account losses of S3.OM in respect of the pulp mill. !

In the period since then the group’s traditional activities have continued at a similar rate of profitability to the first half. However, the losses in Winstone Samsung Industries, Ltd, have continued, and the expected reduction in these losses has not been achieved owing it the continued decline in the world market demand for thermo-mechanical pulp. “In December a further unexpected marketing difficulty arose over the quality specifications of certain pulp shipments which, the company expects, will soon be resolved by technical experts. “Although the continuing losses of Winstone Samsung have a material impact on the financial results of the group as a whole, the trading of the traditional group activities continues to be satisfactory. “Because of the additional unexpected mill problems the earlier group projection for the full year to March 31 is unlikely to be achieved.

“Winstone, Ltd, has to date kept its shareholders and the media properly informed of the problems it has been experiencing with the pulp mill, and will continue to do so as and when appropriate,” the statement concluded.