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Gunns Ltd shares tumble 6.93pc

Posted on August 15, 2008, 4:04pm and updated on August 18, 2008 at 1:43 pm

Gunns Ltd shares tumbled nearly 7pc on Friday after the company flagged its full-year profit would be lower than the previous year.

Unaudited NPAT for fiscal 2008 was estimated at $67 million, down 24pc, based on preliminary, unaudited figures.

Gunns said key drivers of the result were challenging industry conditions in the softwood market and higher interest costs despite a strong performance from hardwood operations.

EBIT for the Auspine business is expected to be approximately $28 million.

“The business (Auspine) has experienced significantly weakened trading conditions through the June quarter as a result of slowing domestic construction activity levels and strong import competition,” the company reported.

“Key factors for an improvement in markets will be expected reductions in domestic interest rates and a weakening in the Australian dollar.”

The overall Gunns profit result includes non-operating costs of $11.7 million, which include the revaluation of financial instruments related to the Bell Bay pulp mill project ($7.6 million) and business acquisition and restructuring costs ($4.1 million).

Earnings before interest and tax (EBIT), before non-operating items and including revenue from managed investment scheme (MIS) financing, is expected to be about $185 million.

EBIT from Gunns’ hardwood operations for the year has increased by about 30pc over the prior year, primarily due to an improving Asian wood fibre market.

The company said demand from this sector had continued to strengthen through the 2008 calendar year, with strong pulp markets and increasing global competition for wood supply.

The pricing outlook for 2009 remained positive.

Gunns said woodchip sales volume for the first half of the 2009 financial year were projected to exceed two million green metric tonnes — an increase of more than 15pc on the previous half year.

MIS sales for the year were stronger than expected at $122 million, with woodlot development of about 16,000 hectares in line with expectations.

The company is currently considering the divestment of a tranche of plantation forest to raise $170 million, which would be used to reduce debt.

Shares fell 16 cents to close at $2.15, a fall of 6.93pc.

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