Managing through tough times

Bob Gordon Managing Director
Over the past week in particular, there has been considerable media coverage about the financial difficulties encountered by some firms in the timber industry.

These difficulties are not unexpected, and in fact have been well understood for many months. The closure of the Wesley Vale and Burnie mills was foreshadowed by its owner Australian Paper last year, and the difficulties faced by FEA have been known for many months as its management sought solutions to its debt position.

Forestry Tasmania's board and management have proactively put in place a number of mitigation strategies to minimise the impact of the industry down turn on our organisation. We will continue to take action to ride out this period of uncertainty.

Obviously, there has and will be an impact on our end of year financial result. For example, the closure of Wesley Vale takes $3m off our bottom line. However, FEA's difficulties, as sad as they are, will not have any material effect on our operating performance.

While the receivership will not materially affect FT, FEA is one of a number of important customers for the softwood joint venture. We have been advised by the joint venture managers, Timberlands, that as far as practicable, it is proceeding with business as usual until FEA's receivers provide direction to suppliers.

Timberlands has also contacted the softwood joint venture’s major suppliers (cartage, harvesting, silviculture) and reassured them that the joint venture is a solid and viable business which will continue to meet its contractual obligations to those parties.

We are managing through this period of uncertainty and industry re-structuring and do not anticipate these recent developments with FEA and Australian Paper will give rise to any change to our employment levels.

We remain confident that international timber markets will emerge from the Global Financial Crisis induced downturn. There are already some early signs of improvement in some market sectors. Whilst the size and breadth of these market improvements are difficult to quantify, FT is positioning itself to take advantage of the improvements as they continue to occur.