Elders’ profit to be hurt by asset writedowns
Elders Limited (ELD) said the outcomes of a review have resulted in total balance sheet write downs and provisions of $133.1 million to forestry asset values and a reduction in earnings guidance for underlying profit by $4.3 million after tax for FY10. The company made the announcement following a Review of Forestry Assets it initiated to provide an examination of the implications for asset values arising from recent forestry sector developments and the anticipated receipt of the yield forecast reports.
Elders said the review has confirmed the company’s current property values across the plantation estate, with the exception of Central Queensland, which would be subject to a material writedown.
“Forecast yields from Central Queensland and Esperance have been reduced materially with consequent writedown to accrued income attributed to these areas,” the company said.
“Yields and property values in other regions (which include Albany, the Green Triangle, Bunbury, Kununurra, Tasmania, and North Queensland) are unaffected.”
Elders had previously advised that the Central Queensland pulpwood plantation has been affected by fungal disease and are unlikely to yield a commercial return. The company said is proposed that the land now be cleared and sold.
Elders said yields are now forecast to be lower than expected in Esperance due to the impact of lower than expected rainfall.
CEO, Malcolm Jackman, said the financial impact of the results in Central Queensland and Esperance is extremely disappointing.
However, Mr Jackman did say the company’s long-term cash flow expectations from Elders Forestry, remain positive, notwithstanding the revision to yield estimates arising from Central Queensland and Esperance.
“We are continuing to experience strong demand for the certified woodchip from plantations and volumes are anticipated to increase from approximately 400,000 to approximately 2.5 million green metric tonnes per annum in the coming 5 years,” he said.
“The cash flow benefits of this in the near term will be supplemented by the inflow of approximately $40 million over the period to 2012 as we divest plantation property that we no longer require.”
As at 1144 AEST, Elders shares were down 6c to $1.135.
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