Shareholders told of rosy CHH future

Press, 14 August 1989, Page 28

Shareholders told of rosy CHH future

PA Auckland The executive chairman of Carter Holt Harvey, Mr Richard Carter, withheld his traditional attack on the Government at the company’s annual meeting in Auckland to paint a rosy picture of his company’s future. He broke tradition by using words such as encouraging, confidence, expansion and positive. His address to shareholders has been noted in the past for its lambasting of the Government and its handling of the economy. This year Mr Carter limited his attack to one soft swipe. Mr Carter said he had attacked the Government for so long, he thought he would give it a break. “I have not changed in any of my views. I am just sick of wasting breath,” he said. His one swipe was at the Budget, saying it would assist in a favourable movement of interest and exchange rates in the long term, but was not a recipe for strong, exportled growth. “Nobody’s grasped that nettle yet, to set New Zealand on a competitive path through its exchange rate with all the people we compete with in the world.”

Mr Carter predicted the company would record a tax-paid profit of $165 million to $l7O million at the end of this financial year, compared with $135 million to March, 1989.

“I like to think, with our normal sense of conservatism, we could give that figure a bit of a shake,” he said in reference to the $l7O million forecast. While little benefit had accrued from any changes in the strength of the economy during the year under review, the present year should be different, he said, as he would see some changes in the economic environment.

The message to option-holders made reference to the CHH debt-to-equity position, which would be aimed at 40:60 rather than the more conservative 50:50.

He mentioned a plan to value the company’s numerous brand names and intellectual property, such as technological rights. Fish quotas held in perpetuity were worth about $65 million; the Copec investment was probably undervalued on the books by half a billion dollars, about half its real value.

The true asset backing of a share was “in all probability” 100 c, or possibly 125 c, higher than the 211 c mentioned in the annual report. “Our current earnings base is now back to a firm upward trend; our balance sheet ratios are strong and will be made stronger. "Our outlook is positive, despite many uncertainties. I believe we will see a sounder trading performance of the group than has been seen for some years past.”

The major investment decision for CHH relates to the Crown’s sale of its forestry assets. After the meeting Mr Carter said he believed New Zealand bidders could cope with the sales on their own financial merits.

If CHH could achieve its objectives in this area, it would be a master of its own destiny in New Zealand concerning further expansion of its primary pulp mills, sawmilling, plywood and fibreboard production throughout the country.

Mr Carter said CHH would benefit from a $5OO million cash injection in its present financial year, which would allow it to fund much of its expansion without redress to a cash issue.

This money would come from the options ($lOO million), convertible notes ($l2O million) and the Krondor Corporation $l5O million payment for taking over the 41 million CHH shares in the Employee Benefit Unit Trust.

Krondor is controlled by Mr Richard Carter and his brother, Ken. Payment is due by the end of this year.

Mr Carter said the convertible notes issue in February had raised $BO million with 45 per cent conversion — into 30 million shares. Another convertible note issue was likely this year for the $l2O million remaining from the authority granted by shareholders in February.