half year results - interesting observations

Hi Gunners

I thought I would outline a few interesting points from the results in no particular order. Just things people might not know and perhaps should know. Other than that the results simply reflect massive non cash writedowns in the core business whilst we continue to wait for news on asset sales, the pulp mill and the Chandler investment. it should be a big next six months for sure!

1) The company says "status of the Forest Note issue will be reviewed". To me this wording sounds like they are considering doing a conversion around the same time as the rights issue goes through.

2) Total debt was reduced by $40m in the half without major asset sales which sounds good but when you dig a little deeper you realise that $90m of inventory and $39m of asset sales were realised in the half. hence there was a cash outflow of $90m from other parts of the business! That is huge.

3) The company says "it is in final negotiation of the key terms of the equity finance structure for the pulp mill"....really?. That sounds like a very positive slant on things. They have been saying this for a while but now they are referring to the final finance structure which sounds different from saying they are negotiating with a partner as to whether they want to come in at all. Sounds encouraging.

4) A debt extension fee of $29.4m was incurred. They will pay the banks this fee to extend the lifeline. What a nice gouge for the banks! wow.

5) The massive collapse in the core woodchip business continues and this accounts for most of the writedowns. They are barely harvesting anything from their own plantations and hence sales fell 65%. This is due to woodchip surplus and switch from japan based market to China based. $A is also a killer. Double whammy.

6) The company will be debt free after the assets sales and the Chandler/rights issue. wow!

7) Assets left to sell are MIS loan book, Green Triangle, Heywood mill, GS MIS rights and 50% of Bell bay.


Thats all folks.

As I have said before In the abscence of pulp mill news the share price should trade back toward the 12c issue price as the rights issue approaches.