Gunns Ltd, the troubled Tasmanian timber group, has made its last attempt to remain viable with a restructure and board changes involving power figure and chairman, John Gay, and supporter and former Tasmanian Premier, Robin Gray.
At the same time it is trying to sell non-core assets and will not market tax-driven management investment schemes this year (which was its financial lifeblood up to the crunch in 2007-08) because there’s no demand.
Mr Gay was chief executive of Gunns for more than 20 years, overseeing the company’s shift from a small sawmilling and hardware company to a timber giant now on the verge of financial implosion, helped by the collapse of its managed investment schemes.
Besides the asset sales, there’s a corporate split and an attempt to lessen the impact that Gunns’ name has in Tasmanian business and politics where the nasty issue for the company is the contentious plans for a pulp plant in the north of the state.
The new Tasmanian ALP minority government, with at least two Green cabinet members, will make the pulp plant a forlorn hope for Gunns, and its new arm that will house it.
But the management moves raised more questions about the sincerity of the changes than they answered.
Seeing the announcement came out at 4.41 pm on Friday, on the eve of the Anzac Day long weekend, it was obviously timed to try and bury the news by the time trading resumes today.
Gunns shares ended at 54.5c, up one cent on the day.
The departures follow institutional investors’ anger over Gunns’ dismal recent performance and intense lobbying against Messrs Gay and Gray.
The sharp slump in the company’s financial position saw the share price collapse by half in late February after rotten interim profit figures were released.
As a result, Mr Gay disclosed last month that he was approached by major investors in Gunns to step down after the 98% plunge in first half earnings.
Gunns said in a statement to the ASX that Mr Gay would retire as chairman and director by November.
But he will be chairman of Southern Star, the new subsidiary to be 51% owned by Gunns.
Mr Gray is retiring from the Gunns’ board in June, but remains a director of Gunns Plantations.
Southern Star’s major assets will be Gunns’ extensive eucalypt plantations and the long-proposed $2.5 billion pulp mill project.
The company will sell off most of its native forest assets as well as its retail hardware business.
Gunns has already issued an information memorandum to potential investors in the stalled Bell Bay pulp mill project.
Non-forestry assets, including the company’s chain of Mitre 10 hardware stores in Tasmania, are up for sale.
More importantly, the company has bowed to reality and won’t market any of its tax schemes this year.
"The Board believes that the investment appetite for MIS schemes is currently very low.," Gunns said in the statement.
"As a result, the Company will not be making any MIS offers this financial year.
"The merits of encouraging plantation establishment through MIS schemes are overwhelming, however we believe that significant regulatory changes are required before investor appetite will return."
That decision contributed to the further downgrading of its earnings outlook for the 2010 financial year.
The company said full-year earnings before interest and tax were likely to be $30 million-$40 million, compared with analysts’ expectations of $40 million-$56 million.
That’s a cut of almost 30% in the space of two months.
"With no expected improvement in volumes/margins to occur for wood chips exported to Japan for the balance of the year we expect a full year EBIT result in the range of $30M to $40M.
"The reported EBIT for the six months to the 31st December 2009 was $5M," the company said.
