Crown Forest has big profit lift

Press, 27 February 1986, Page 23

Crown Forest has big profit lift

Crown Forest Industries, Ltd, the Canadian subsidiary of Fletcher Challenge, Ltd, had pretax earnings in 1985 of $Can3O.6M (SNZ43.BM) — a $Can43.4M (SNZ62.IM) increase on the previous year’s loss of sCanl2.BM (SNZIB.3M). Sir Ronald Trotter, chairman of Fletcher Challenge, said: “The dramatic turnaround. is due to a number of factors, particularly the beneficial results arising from the major restructuring of Crown Forest and a period of nearcapacity operation. “The result included a creditable December quarter when Crown Forest achieved earnings of $Can5.BM (SNZB.3M) against $Can9.5M (SNZI3.6M) for the same period last year. That Crown Forest was able to make such a sound contribution at a time when demand and prices for pulp and, particularly, newsprint had temporarily softened, indicates the strength of progress the company has made.”

progress was even better appreciated when it was realised that, since 1983, when Fletcher Challenge became involved with Crown Forest, its pre-tax earnings had gone from a loss of $Can33.lM (SNZ47.4M) to a profit of $Can3O.6M (SNZ43.BM), a turnaround of $Can63.7M (SNZ9L2M). Progress was continuing. Falling exchange rates for the United States and Canadian dollars had greatly improved the competitive position of Crown Forest in its traditional markets when demand for both pulp and newsprint was finning as it was for plywood and the better grades of timber.

In addition, benefits from the profit improvement programmes were continuing. Sir Ronald said the directors looked forward with considerable optimism to a further significant increase in the 1986 results. Crown Forest recorded 1985 pre-tax earnings of $Can3O.6M on sales of $CanB53M. It was the first year of

earnings for Crown since 1981, and it represented a $Can43.4M improvement over a 1984 pre-tax loss of sCanl2.BM (before extraordinary items). Mr lan Donald, Crown president and chief executive officer, called the 1985 results encouraging but still far from the potential when compared with the company’s 1979 pre-tax earnings of $Can9OM and the need to generate funds for the capital expenditures was taken into account.

The company was now inivolved in a sCanlsM twin-wire installation programme at its Elk Falls pulp and paper mill. By the end of 1985 it had also essentially completed the modernisation and expansion of two major packaging facilities.

Mr Donald said that demand for newsprint remained reasonably strong, but price increases anticipated early in the year were not realised because of pressure from overseas suppliers entering the company’s traditional markets.