Was it wood or trees that meant more money for Elders and Gunns after statements from both companies yesterday?
Elders sold its tax-driven tree business, Gunns is buying it (subject to raising $145 million), all to fix up Elders’ poor financial base.
And Elders looks like asking shareholders for around $400 million in a one for one rights issue.
Gunns announced that it is to acquire ITC Timber Pty Ltd from Elders, financed through a $145 million capital raising.
Elders announced the sale as part of its continuing quest to find more money, after selling its insurance business to QBE recently so that it can complete the refinancing of its debt with its banks by the end of this month.
But while it is proposing to buy more trees, Gunns said in its 2009 profit report that the market for forest products remains difficult.
It produced a virtually flat annual net profit and is still negotiating over the financing of its controversial pulp mill project at Bell Bay in Tasmania.
Gunns booked an annual net profit after tax for the 2008/09 financial year of $56.24 million, down 1% on the prior year.
Revenue for the year ended June 30, 2009, fell 10.7% to $769.34 million.
The company declared a final dividend of 2c per share, half the 4c in 2008.
That took the 2009 total payout to 4c a share, down 60% from the 10c in all of financial 2008, a good sign of the strains the company remains under.
Gunns chairman John Gay said the outlook for Gunns’ forest products business remained difficult.
"Wood fibre sales are largely dependent on the Japanese market and economic conditions which are expected to remain weak through at least the course of the first quarter of the 2010 financial year, with the strengthening Australian dollar adversely impacting our competitive position," Mr Gay said in yesterday’s ASX statement.
"Our timber operations are well positioned to benefit from any recovery in the domestic construction industry."
Gunns said it would continue to focus on reducing debt and controlling costs to manage the business through the current economic environment and take advantage of ongoing opportunities.
For Elders yesterday’s mooted deal will provide a $100 million gross payment from Gunns.
On top of that it’s conducting a capital raising as part of a refinancing and recapitalisation of the company.
"Elders Limited has requested a trading halt in its securities pending finalisation of the terms of a comprehensive recapitalisation and refinancing of the Company," Elders said in its ASX statement.
"The recapitalisation and refinancing, together with asset sales announced today or in recent months, will provide Elders with the strong and sustainable balance sheet with which it can pursue its strategy to be Australia’s leading rural services company."
Elders announced on July 31 the sale of its insurance operations to QBE Insurance for $270 million.
As part of that deal, QBE is to subscribe to $45 million in Elders shares under the recapitalisation about to take place.
Elders says its report on its financial results for the 12 months to 30 June 2009 will be released together with the recapitalisation and refinancing announcement.
When the market closed on Friday, Elders shares were trading at 39 cents.
The issue could be made around 30 cents, according to some media and broking reports.
Gunns last traded at $1.45 before its shares were suspended late last week ahead of the Elders deal and the $145 million fund raising yesterday.
