Gunns Profit Slides to $56 Million

Submitted by Jim Thesiger on 1 September, 2009 - 02:57

Gunns (GNS), a company that is engaged in the hardwood forest product industry has declared its plan to raise $145 by share placement which will assist it to purchase ITC Timber from Elders which will cost the company $100 million. Gunns recently announced a slight drop in its annual profit and admitted that the situation in the forest product market is still critical. Elders on the other hand issued a separate message where it stated that the company is working on the terms for a comprehensive recapitalisation and refinancing and is planning to use the funds that will be generated from the sales of assets to Gunns to pay debts and also for recapitalisation.

The Gunns authority claimed the negotiations to be positive with a preferred joint-venture partner for its Bell Bay pulp mill which is located in Tasmania and the talks with possible bank lenders were progressing as well. Gunns saw 5.1 percent fall in its net profit to $56.2 million for the year to June 30 where the earlier year net profit was $59.2 million. The profit developed on an 11 percent drop in revenue which fell from $861.9 million to $769.3 million. Gunns will reduce the final dividend to 2c per share from 4c. The prfit figures were about $10 million down from what JPMorgan. and Royal Bank of Scotland previously forecasted.

According the chairman of the company John Gay, the domestic and international demand for forest products experienced a downturn especially in the third quarter of the preceding fiscal year. The revenue from wood fiber business mostly relied on the Japanese market and the financial condition is likely to remain weak for the present quarter, Mr. Gay added. The Gunns chairman also feared that the company might take another blow due to the strengthening Australian dollar which might hamper his company’s competitive position.

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