NZFP sales, costs expected to rise

Press, 12 July 1985, Page 16

NZFP sales, costs expected to rise

NZ Forest Products, Ltd, expects a good demand for its products for at least the first half of the current financial year, says the chairman, Mr L. M. Papps, in the annual report. He says, however, that f>rices in overseas markets are ess favourable than they were, and it is likely to be the second half of the year before there is any improvement. A number of factors will add to the company’s costs during the year, he says. Higher power, coal, and oilbased fuel prices, increased transport costs, higher interest rates, and bigger wage and salaries after the end of the wage freeze. “These will be compounded by the 50 per cent reduction in export tax incentives, which became effective at the beginning of the new financial year, and by continuing effects of last year’s devaluation of the New Zealand dollar on overseas borrowings,” he says.

Mr Papps adds, however, that, “given the co-operation of the union movement," an acceptable result will be produced despite the difficulties. As reported, the total group net profit rose 41.1 per cent to $110,219,000 in the year to March 31, compared with the previous corresponding period. Included in the result were equity earnings, which more than doubled from $12,856,000 to $26,851,000. There were no extraordinary items ($2,347,000 profit previously). Sales rose 31.6 per cent to $1104.6M. The profit was after provid-

ing $14(250,000 more for tax at $20.6M, and $4,039,000 more for depreciation at $30,185,000. A recommended final dividend of 8.5 c a share increases the annual rate from 13c to 14.5 c a share (29 per cent) on capital increased by the one-for-four bonus issue in April, 1984. The dividend requirement is $42,525,000 and it is covered 2.6 times by the profit. Shareholders’ funds rose $168,911,000 to $727,096,000, including ordinary capital up $28,184,000 to $136,212,000 after the cash issue, staff share issue, and issue of shares for land. Working capital improved $112,961,000 to $212,433,000, and the current ratio rose from 1.3:1 to 1.6:1.

Earnings on average ordinary shareholders’ funds were 17.2 per cent. The net tangible assets per 50c ordinary share is $2.65. The ratio of shareholders’ funds to long-term debt is 2.2:1.

Overseas loans outstanding at March 31 were the equivalent of $216,334,000 (after as-yet unrealised gains on forward contracts of more than $11M), compared with $166,762,000 the previous year. The report says the gross forest land area held by NZFP increased 3609 hectares to 219,593 hectares during the year; the net stocked area increased 4126 hectares to 169,624 hectares.

It quotes the overseas forest consultant who regularly audits NZFP’s forest management as reporting, in March 1985, that health of the com-

pany’s forest appeared excellent. Older-age classes of trees were being conserved as much as possible against a planned increase in demand in the early 19905, the report says. It is intended to revalue the company’s forests on March 31, 1986. Mature areas managed to produce a sustained annual yield will be valued on the basis of earning capacity. Other forest areas will be valued at cost. The report shows 76.8 per cent of the company’s shares were held in New Zealand at May 31, 18.2 per cent in Australia, and 1.3 per cent in Britain. The holding of Wattie Industries, Ltd, in NZPF through the subsidiary, Dominion Industries, Ltd, was 23.8 per cent of the total shares issued at May 31. The AMP insurance society is the next biggest shareholder with a stake of almost 12 per cent.