Forest reports ‘misleading’

Press, 17 December 1988, Page 9

Forest reports ‘misleading’

By

JANE DUNBAR

Reports of the Forestry Corporation financial results are “grossly misleading,” says the New Zealand Timber Industry Federation. “In proper accounting terms the 18-month result could be nearer to a loss of $2OO million,” said the Federation’s executive director, Mr Wayne Coffey. The corporation had presented a $9O million “surplus” in its first 18 months, said Mr Coffey. “But most public statements have failed to mention that as the asset values have never been settled the so-called surplus did not include the interest costs on the debt needed to acquire the assets.” Even if the corporation assets were valued as low as $1 billion with a 50-50 debt-equity ratio and a 16 per cent interest rate, the debt servicing costs over an 18-month period would be $l2O million, he said.

This meant the corporation would have made a loss of at least $3O million. At an asset value of $3 billion, the loss would be $270 million. Mr Coffey’s comments were themselves “grossly misleading,” said the corporation’s managing director, Mr Andy Kirkland. It had been made clear that as the corporation had not acquired its assets it was unable to report in conventional financial terms, he said. All comparisons had been cash ones. Mr Kirkland questioned Mr Coffey’s arithmetic in arriving at $2OO million loss for the corporation. Mr Coffey had left out a number of items required in a proper financial statement, and presented a slanted view, he said. The changing role of young forests, for example, should have been taken into account, said Mr Kirkland.