NZFP object to land valuation increases

Press, 31 August 1984, Page 8

NZFP object to land valuation increases

PA Auckland NZ Forest Products has taken issue with the Valuation Department about an 80 per cent rise in the official valuation of the group’s land holdings. If its efforts to have the revaluation lowered are unsuccessful, rates payable by NZFP on its 215,000 hectares of forest land will rise by a proportionate amount. The managing director, Mr Warren Hunt, said after yesterday’s annual meeting that the multi-million-dollar increase in rates would “come right off the bottom line”. NZFP is not the only forestry group to be hit with the sharply higher valuations. Numerous companies have filed objections with the Valuation Department. A decision is expected shortly.

An independent valuation of the group’s forest assets (a separate asset in NZFP’s balance sheet) may be made this year after further consideration has been given by the board. Mr Hunt said the issue was being looked at, but no dates had been set for the revaluation. NZFP forests are valued at less than $2OO million, but conservative estimates of their real market worth are up to five times that amount.

Earlier, the chairman, Mr Lyn Papps, had told the meeting that Sales and profits in the first quarter of 1984-85 were ahead of budget and substantially higher than last year. Buoyant trading conditions enjoyed in the second half of the year to March 31 had continued and “there is every reason to expect that markets both in New Zea-

land and offshore will continue to absorb all the product we can produce during the remainder of the year.” Mr Papps later said, in reply to a shareholder’s question: “We could produce another 25 per cent and still sell it all.”

NZFP was walking a tightrope keeping local ahd overseas customers happy. The better trading conditions had translated into quicker cash flow, which had been used to some extent to reduce temporary domestic loans by $46.5 million. The group had also been able to reduce its exposure in the commercial bills market.

However, borrowings would begin to increase later this year, Mr Papps said.

“It will become necessary to refinance maturing loans and arrange further funding during the next four years,

as the capital works programme proceeds.” The devaluation, he said, , affected NZFP in a number of ways. Although management had taken out some forward cover before the announcement, it had not foreseen the size of the devaluation, and exchange losses had been incurred.

The cost of servicing offshore loans would rise, as would the cost of plant and equipment to be used in the modernisation of the No 1 pulp mill and the new sawmill at Kinleith.

The negative implications were expected to be outweighed, though, by increased revenue from offshore buyers. The higher cost of the capital expenditure programme was also expected to be limited by relying more on New Zealand suppliers for much of the plant, he said.