Carter Holt's Australian building products unit returns to profit in 2014

Carter Holt Harvey's Australian building products unit returned to profit in 2014, as it fattened margins on increased sales, reversed prior impairment charges and reaped a gain its share of the sale of pulp, paper and packaging businesses.

The Australian business, which was renamed Carter Holt Harvey Building Products Pty this month, reported a net profit of A$167.7 million in calendar 2014, turning from a loss of A$14.3 million a year earlier, according to financial statements lodged with the Australian Securities & Investments Commission.

That included a A$43.5 million gain on the sale of operations involved in the manufacture and distribution of packaging materials to Japan's Oji Holdings and Innovation Network Corp of Japan, which bought the New Zealand group's pulp, paper and packaging businesses last year for NZ$1.04 billion.

Stripping out the discontinued operation, Carter Holt's Australian unit posted a profit of A$124.1 million compared to a loss of A$17.3 million, with a 17 percent gain in revenue to A$893.2 million. That was bolstered by the reversal of A$50.9 million of impairment charges in prior years, and a A$55.1 million income tax benefit largely derived from the recognition of previously unrecognised temporary differences, the statements show.

Operating profit from continuing operations more than doubled to A$107.5 million, while gross margins widened to 9.4 percent in the 2014 year from 5.6 percent a year earlier, and the unit shaved 46 percent from its finance expenses to A$39.3 million. Operational cash flow soared to A$84.4 million in the year from A$9.2 million, and the unit had cash and equivalents of A$42.5 million as at Dec. 31.

The financial statements make no mention of whether the company is reviewing its capital structure or ownership, though recent reports claim Graeme Hart's Rank Group is being advised by Credit Suisse First Boston banker Rob Stewart and local affiliate First NZ Capital to look at a potential initial public offering where Hart will sell a 70 percent stake in the business.

The result bolstered the Australian unit's retained earnings, leaving it with total equity of A$131.6 million as at Dec. 31 compared to A$12.8 million a year earlier, while total borrowings shrank to A$257.3 million from A$328.2 million at the end of 2013.

Notes to the Australian unit's borrowings show the Carter Holt Harvey group prepaid US$2.9 million and NZ$739.5 million of its banking facility in the 2014 year, funded primarily through the sale of the pulp, paper and packaging businesses to Oji and Network Corp of Japan.

As at Dec. 31 the group debt obligations consisted of a fully-drawn term loan of NZ$274.4 million, a fully-drawn term loan of NZ$42.9 million, and an undrawn revolving facility of NZ$50 million. The facility matures on Sept. 30, 2016. The Carter Holt Harvey group also repaid a US$150 million debenture on April 15 which matured that month.

During the period, Carter Holt Harvey Australia advanced A$46 million to Carter Holt Harvey Investments Australia and subsequently forgave that debt. In 2013, the Australian unit forgave a A$139.3 million loan owed by one of its subsidiaries, reducing its capital by A$53.6 million in connection to the transaction.

Carter Holt Harvey is made up of three divisions: building products makers Wood Products NZ and Wood Products Australia, and building products trade and retail supplier Carters.

The group yesterday entered a conditional agreement to sell its Kopine and Bestwood units to New Zealand Panels Group.

(BusinessDesk)