Hancock NZ chief McCallum upbeat on outlook for timber   17 Apr 2015

Hancock NZ upbeat on outlook for timber as local units post mixed results

By Tina Morrison

April 17 (BusinessDesk) - Hancock Forest Management (NZ), the local division of the world's largest timberland investment manager, is confident about the outlook for New Zealand timber.

"The domestic market right now is on a pretty firm footing. There is some pretty solid construction activity in New Zealand right now," said Bill McCallum, general manager of Hancock's local unit, which sells 70 percent of its volume domestically. "We're very confident in the outlook for timber and New Zealand's ability to produce timber on a sustainable basis so our investors are confident about the outlook."

New Zealand residential building consents rose to a seven-year high in 2014, led by the rebuilding of earthquake-damaged Christchurch and a shortage of housing in the nation's largest city of Auckland, although residential consents have declined for the latest three months.

Christchurch still appeared to be in the early phases of rebuilding with activity set to continue for some years, while building activity in Auckland would likely have to continue or strengthen to meet demand for housing, McCallum said.

Hancock, a unit of US-based Hancock Natural Resource Group, is the largest owner or manager of planted forests in New Zealand, with more than 200,000 hectares of forest under management, according to industry figures published on the New Zealand Forest Owners Association website.

While New Zealand's main log export market of China had softened, McCallum said the market would probably pick up in six months as reduced supply crimped inventories.

Hancock's local unit, based in Tauranga, exports logs to China, Japan, Korea and India. The American company made its first forestry investment in New Zealand in 2004, and boosted its holding by buying about 200,000 hectares of timberland and forestry rights from Carter Holt Harvey in 2006. McCallum declined to comment on the financial results of its local businesses.

Hancock Forest Management (NZ), which is the property manager for Tiaki Plantations, Tasman Bay Forests and Taumata Plantations, paid $500,000 of dividends in calendar 2014, down from $2.25 million the previous year, according to its financial statements. Profit almost halved to $911,386 from $1.76 million a year earlier.

Reports filed with the Companies Office show Taumata Plantations, purchased from Carter Holt in December 2006, narrowed its loss to $32.9 million in the year ended June 30, 2014, from a loss of $34.6 million the previous year. Its latest earnings were dented by financing costs of $126.7 million relating to an interest payment on notes. It paid no dividend.

Taumata's domestic revenue from timber sales increased 11 percent to $193.4 million, while export sales gained 15 percent to $204.6 million. During the year, the company harvested 6,049 hectares of forest, leaving it with 140,559 hectares of productive land and 9,335 hectares awaiting replanting.

Meanwhile, Tasman Bay Forests, which has plantations in the Nelson/Tasman Bay region, had a 44 percent drop in profit to $28.6 million in the year ended Dec. 31, 2014. A $29.8 million revaluation gain for the company's biological assets in the latest year lagged behind the year earlier's $58.5 million gain. It earmarked $10.2 million for dividends.

Tasman Bay's export timber log sales fell 12 percent to $20.6 million, its domestic log sales slipped 4.1 percent to $18.2 million and its domestic pulpwood sales dropped 25 percent to $3.5 million. The company harvested 695 hectares during the year and planted 701 hectares, leaving it with 23,665 productive hectares at Dec. 31.

Tiaki Plantations, which has harvesting rights over about 23,856 hectares of timber plantations in the Central North Island that it acquired in several tranches up to October 2004, almost tripled profit to $20 million in the year ended June 30, 2014, from $7.3 million the year earlier as its biological assets increased in value by $13.3 million, compared with the year earlier when they dropped in value by $3.2 million.

Tiaki's domestic timber income slipped 0.6 percent to $25.8 million, while its export sales gained 11 percent to $63.4 million. It paid a dividend of $16.6 million.

(BusinessDesk)

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