gunns savaged on the asx

Gunns savaged on ASXMICHAEL STEDMAN

May 26, 2010 12:01am

TIMBER giant Gunns Ltd lost nearly a quarter of its value yesterday as shares tanked to just 26 cents.

In a demoralising day on the Australian Securities Exchange yesterday, spooked investors traded nearly 40 million Gunns shares, with rumours a major institutional investor may have severed ties with the embattled company.

Gunns' market capitalisation fell to just $213 million, down from its peak of nearly $1 billion two years ago.

It came just a day after the company announced the $40 million sale of its hardware retail arm.

Shadforths financial analyst Matthew Torenius said it was the heaviest volume of Gunns shares traded in at least a year.

"It would appear some of the major backers have had enough of the institution and have voted with their feet," Mr Torenius said.

There was a silver lining however, with news Gunns' major Japanese customers had obtained Forest Stewardship Council "controlled wood status" for woodchips sourced from specified areas of Tasmania.

FSC chief executive Michael Spencer said that did not mean Gunns itself had obtained FSC certification.

"Essentially, it means Gunns have been able to develop a process to separate and exclude wood from areas where high conservation values are threatened and native forests are being converted to plantation," Mr Spencer said.

He said that effectively meant 600 out of Forestry Tasmania's 900 coupes could not be chipped for export to Japanese markets.

"It is an important acknowledgement from our point of view that this is where the markets are heading."

Gunns chief executive Greg L'Estrange said the certification would provided much needed certainty to the customers of Japanese pulp and paper manufacturers. "Being independently audited by certifying bodies on a continuous basis demonstrates commitment to the responsible, sustainable management of forestry operations and the environment," Mr L'Estrange said. "It invites independent scrutiny of all aspects of the business in a completely open and transparent way."

Gunns has also revealed a renegotiated 2010 woodchip price of $189.50 per bone-dry metric tonne, $1 below last year's price.

Industry analyst Robert Eastment said both developments should aid Gunns' flagging fortunes.

"Credit has to go to Greg L'Estrange he has taken this on and is changing the culture of the company," Mr Eastment said.