Woodchipper Gunns says the future value of the company relies upon the completion of its controversial $2.5 billion pulp mill at Bell Bay in Tasmania.
Gunns on Monday posted a $173.3 million loss for the six months to December 31, a widening from the $4.65 million loss in the same period in the prior year.
The strong Australian dollar made it hard for the company to compete with cheaper products in the Asian market.
Gunns’ bottom-line result included $168.8 million of charges related to asset valuations and restructuring costs.
Underlying earnings (earnings before interest and tax) in the six months to December were $12.3 million, and Gunns expects full-year underlying earnings to be $30 million.
Gunns managing director Greg L’Estrange said the focus of Gunns was on completing a company restructure and the Bell Bay pulp mill.
“The future value of Gunns is clearly driven by the completion of the pulp mill project,” Mr L’Estrange said in a statement.
“The steps to achieving this have been identified and are being executed by management.”
Gunns said it was engaged in final negotiations of the key terms of the equity financing structure for the pulp mill.
“Finalisation of the project is critical for the company to underpin and unlock the value of the Gunns’ forest estate and address Australia’s near-term position as a high-cost woodchip export supplier to an over-supplied market,” Gunns said.
Mr L’Estrange said work was continuing to finalise a recently announced proposal to issue $150 million in new Gunns shares to New Zealand billionaire Richard Chandler.
The company also proposes to conduct a rights offer to existing shareholders, that could take the amount raised to $282 million.
“The proposed equity investment proposal will be outlined in a detailed offer document currently being prepared for shareholder consideration and approval,” Mr L’Estrange said.
Gunns said that in the first half of the 2011/12 financial year its business continued to be adversely affected by the high value of the Australian dollar against the US dollar in which the products of Gunns’ competitors were priced.
Restructuring costs also contributed to the first-half loss.
Gunns has been selling non-core and native forest assets to eliminate the use of Australian native forest, in favour of plantation forest.
The company said market conditions for its wood fibre business would remain difficult while the Australian dollar maintained its strength against the US dollar.
Earnings from Gunns’ softwood sawn timber operations rely on the domestic construction sector, and that was currently in a cyclical low, Gunns said.
Gunns said prices for plantation woodchips declined in the first half.
Gunns’ first-half revenue fell 40 per cent to $217.4 million from $363.4 million.
Gunns shares were one cent higher at 18.5 cents on Monday.
