Wednesday, 22 December 2010

Trust us

Simon’s plaintive cry suggested, inter alia, environmentalists are operating in “a knowledge vacuum” away from “the harder reality” of a true understanding of ecology and conservation.

Maybe but what’s worse is that forestry issues continue to be discussed in an economic vacuum away from the harder reality of dollars and cents. I’m not suggesting the latter should be the only criteria but to ignore them completely will lead to an unrealistic analysis and erroneous conclusions.

Simon laments that “professional foresters and conservation biologists have been largely disenfranchised”. Welcome to the Club.
Accountants and economists have likewise been largely ignored.

Tuesday, 7 December 2010

A state of delusion

Reading transcripts of Government Business Scrutiny Hearings can be boring.

But it can also be revealing. Sometimes it’s the questions. Other times the answers. Sometimes it’s the non answers.

Wednesday, 17 November 2010

Football and the Nanny state

Talking about Bellerive Oval ( HERE ) Paul Muller laments the lack of interest by Governments in spending further funds. “That it lies all but barren for the remainder would suggest to even armchair economists that it is failing to realise its profit potential”.

The world is awash with surplus supply capacity following the GFC. It surely cannot be a serious proposition to assert that such a situation requires Government funding to create more demand.

If so we’ll be insolvent even sooner.

Tuesday, 26 October 2010

Gunns: The next chapter

The Truth and Reconciliation Roadshow continued last week with a presentation by Gunns’ CEO to a conference run by investment bank UBS, coincidentally a Gunns’ shareholder.

The changes from the presentation which accompanied the release of Gunns’ preliminary 2010 financials in mid August were subtle and revealing of the future chosen path.

John Gay’s business model was then described as being “a conglomerate of long life low yielding assets…..(consisting of) many businesses….. excessive levels of encumbered assets .....excessive debt levels to earnings,..... (where) potential investors do not understand the business.”

The latest presentation includes further criticisms of the old model. Mr L’Estrange confirmed that Gunns was “cash negative” and was bedevilled by “aging inefficient assets”.

Cash negativity is a fairly serious condition. If it persists disaster usually awaits. Aging inefficient assets make the problem worse.

Forget about a social license. Gunns needs cash and a more ‘efficient’ portfolio of assets.

Monday, 25 October 2010

Ponzi Government?

It was pleasing to see the burgeoning discussion of the problems confronting the State being attempted in the article Ponzi Government HERE.

But a lot of the assertions were either wrong or exaggerated.

To start with the title of the article is misleading. The current cash flow problems of the State Sector in no way resemble a Ponzi scheme.

Tuesday, 19 October 2010

Insolvency and Forestry Tasmania

If there are times when Forestry Tasmania’s appears secretive, maybe it’s because it doesn’t always know what’s happening.

It was unaware of its possible insolvent status until it was pointed out by its Lender, Tascorp, the State Government’s finance arm.

Forestry Tasmania’s recently released 2010 financial statements revealed that it had breached lending covenants. The breach which had been overlooked by the Directors was discovered by Tascorp when reviewing the 2009 financials.

Friday, 8 October 2010

Gunns: Is the worst over?

The forest industry’s slow motion train wreck continues its inexorable journey.

There are many, on both sides of the forest debate who appear to accept the urban myth that had it not been for the actions of high profile activists, Gunns’ former CEO would still be ensconced in Lindsay St Launceston.

A quick glance at the ASX announcement on 16th August 2010 outlining Gunns’ achievements in the financial year 2010 reveal that Gunns’ old business plan was a failure. The company’s old model was described as being “a conglomerate of long life low yielding assets…..(consisting of) many businesses….. excessive levels of encumbered assets .....excessive debt levels to earnings,..... (where) potential investors do not understand the business.”

Tuesday, 14 September 2010

The death of Forestry Tasmania

If Forestry Tasmania was a private company it would now be in the hands of an Administrator.

The recently released financial accounts for the 2009/10 year paint a bleak picture.

Monday, 16 August 2010

Forest industry nonsense

Banks, shareholders and grower/investors have all been traumatised by their recent dealings with forest companies and they’re all reconsidering their position.

The only other major source of much needed capital for the industry are Governments, so it was not a complete surprise to see industry lobbyist Dr Amos launch such a spirited, if at times venomous response ( On TT: Beware of Academics Bearing Arithmetic, HERE ) to attention being drawn to the level of Government assistance already enjoyed by his industry.

Tuesday, 10 August 2010

MIS an abject failure

It’s like standing in St Peter’s Square awaiting the first wisps of fumata bianca from the Sistine Chapel. The selected stakeholders continue to mull over our fate but are not telling us anything.

What are they discussing?

Tuesday, 18 May 2010

Forestry Tasmania the stumbling block

FT’s Managing Director Bob Gordon was recently reported in the Mercury HERE as saying, in explanation of FT’s current woes, “(w)e hit an iceberg 18 months ago, we have repaired it and we are back on track again but it is just a matter of how long it takes to see the result on the ground.”

Eighteen months ago, that’s November 2008.

Sunday, 25 April 2010

Accounting for Dummies: Lessons from the forest industry

The suggestion in the title is that accountants are smarter than the average. Most aren’t.

Accounting is essentially about debits and credits, plusses and minuses to use the generic terms. Not exactly rocket science. But much of what is presented in financial statements confuses rather than promotes understanding, deliberately so at times, unfortunately not an uncommon occurrence amongst professions.

The following is an attempt to outline the lessons, 17 in total, from the financial statements of Great Southern, Timbercorp, Forest Enterprises (FEA), Gunns and Forestry Tasmania (FT), by presenting a common sense interpretation of some of the more significant features, and perhaps provide the new Minister with an accounting analysis of the current forest industry, lest he thinks it is in suitable shape to provide a springboard for the future.

Saturday, 24 April 2010

Nothing has changed

A prognosis of a terminal condition is always considered to be a true test for those involved.

Gunns’ undertook a strategic review following its half yearly report in Feb 2010 and report to the market in April. If the recent ASX announcement is in fact the interim report, then maybe Gunns’ woes are worse than expected.

Thursday, 15 April 2010

Gunns through the looking glass

Readers of financial statements of failed and failing companies over the last few years can be forgiven for concluding that some were prepared with the assistance of the same additives that Lewis Carroll allegedly used to clear his writer’s block.

The forest sector is no exception.

Great Southern and Timbercorp have spun off course, FEA is currently in a lengthy pit stop, refuelling and searching for additional sponsors, and now Gunns is showing signs of distress.

The strategic review into the restructure of Gunns is due to issue an interim report by the end of April.

The rationale for the demerger proposal is to unlock the value that the market is currently failing to recognise. Why is the market mispricing Gunns’ shares? Has the market got it that wrong? What is contained in the financials that gives the current Board reason for such optimism?

Tuesday, 6 April 2010

State of change

Interesting stuff, Peter. (article below, and The Randwick inclusive power-sharing arrangement, HERE)

Changes are afoot. But are we failing to see the wood for the trees?

The comment by Arthur Sinodinos, that “the health network proposal is the harbinger of the federation inexorably dissolving into a quasi regional model along British lines”, is a particularly relevant and timely reminder that the major decisions in the next few years are not about building 4 lane highways or pursuing puerile populist policies like royalties for regions, but in helping chart the administrative structure for the medium term future.

Friday, 19 March 2010

Gunns discovery expedition

IT WAS bound to happen.

The institutions growing weary of propping up Gunns, whilst seeing its share price plummeting.

They’ve been too kind for too long.
Gunns is now a fairly lowly ranked listed company, coming in at about 250th on the latest ASX list in terms of market capitalisation with a figure of about $450 million.

Nevertheless the institutions which control over 80% of the issued shares have no great desire to see the rest just fritter away.
That’s why the restructure plans have been floated.

Friday, 12 March 2010

Tourism freeloaders

The tourism industry is always held out as the way forward.

Perhaps it is.

But is it immune from making unreasonable demands upon Governments? And are the existing political parties able to distinguish spin from fact? And do they treat them equitably when compared to other industries?

Tuesday, 9 March 2010

FEA treading water

Forest Enterprises (FEA) are suspended from the ASX not because they’re in the midst of discussions with their bankers, but because they are in breach of ASX listing requirements.

They are yet to file their half yearly report due by the end of February 2010.

FEA are currently insolvent because the banks intend to test their loan covenants by using the yet to be released results.

They’ve now been in breach of banking covenants for 9 months.

Tuesday, 2 March 2010

Bartlett and the new forests plan

Mr Bartlett announced funds would be made available “for the implementation of the new Forest Industry Plan, released in January by the Forests and Forest Industry Council of Tasmania” HERE.

One doesn’t need to be a graduate of Dave’s much acclaimed Tasmania Tomorrow, for the merest cursory examination to raise doubts about the Plan.

Dave’s blind acceptance of the Plan is quite staggering. He couldn’t possibly have read the document.

It wasn’t a reasoned Business Plan. It was designed as a political document, as is evident by his reference to the Plan at a time in the campaign when the divisive forestry issue was needed to lift his flagging fortunes.

Sunday, 28 February 2010

Gunns' banking dilemma

David Symons this week in the Fairfax media canvassed the worth of Gunns and suggested it’s only got 4 months to sort out the restructure proposal else it may find itself in breach of its banking covenants (HERE).

A bit like FEA at the current time.

But what are these banking covenants? How do they work?

Thursday, 25 February 2010

Oh what a tangled web

Oh what a tangled web we weave, when first we practise to deceive.

The slow and tortuous wind up of the MIS companies Great Southern and Timbercorp has laid bare the legal complexities that were not envisaged by the Masters of the Universe who first created the monsters.

But it’s getting worse.

If Eucalyptus Nitens are causing toxicity problems in the Georges River area, then maybe the owners of the trees should be getting a little twitchy.

Monday, 22 February 2010

Spend, spend, spend...

Transparency may not be Paul Lennon’s abiding legacy, but that was the stated intention of the Charter of Budget Responsibility Act 2007 enacted during the ex Premier’s unforgettable tenure.

The CBR Act requires a Government to set out its fiscal strategy and to report its performance at regular intervals.

It also requires Opposition parties to release a fiscal strategy at election time.

The purpose of a fiscal strategy statement according to the Act is to establish a benchmark for evaluating the Government’s fiscal performance; and increase public awareness of the fiscal policies of the Government and Opposition parties.

Wednesday, 10 February 2010

Our vanishing tax base

In an earlier article covering issues facing the Tasmanian economy in these pre election times (HERE: Our economic black hole), the matter of the Government’s little known but very large overdraft was examined. The latest Mid Year Financial Report shows the State’s net cash reserves plummeting to $313m by 2012/13 despite the fact that the Superannuation Provision SPA a/c should show a balance of $1,589m by 2012/13.

Whilst Treasury no doubt has a conservative and achievable plan to reduce the overdraft, the so called temporary Debt Repayment a/c, and at the same time provide for the extinguishment of the unfunded super liability by 2035, it is not at all clear that Mr Bartlett’s current spending spree is based on the Treasury plan or indeed if Mr Hodgman’s plan to abolish taxes can be accommodated within that same plan. Without further info, we are all in the dark. As shareholders in Tas Inc it is a little unnerving.

In this second part a search for the ‘black hole’ that we were warned about as little as 12 months ago will be attempted. What happened to the State’s income as a result of the GFC, and how will the policy decisions and promises that have occurred recently affect this level of income?

Monday, 8 February 2010

Another forest industry plan

The Forest and Forestry Industry Council FFIC have recently released a 106 page report detailing their Plan for the future: The New Forest Industry Plan: HERE

Most credible plans will attempt an analysis of the past before attempting to outline a future course of action. The description of the past is skimpy and the analysis non-existent. It’s a little hard to give credence to the new Plan built on these foundations.

There is, however, one conclusion that is very revealing.

“Sawing trials have concluded that E.nitens plantation stock is unsuitable for, and uneconomical as, a source of wood for appearance grade sawn products. This is because of the considerable degrade associated with the seasoning process (in particular, surface checking and unrecovered collapse). .............. Unless these challenges (associated with processing plantation timber) are overcome, a large proportion of the current Tasmanian hardwood production industry is unlikely to be able to profitably or sustainably process plantation sourced logs into high grade products.”

Basically, FFIC has led the industry up the wrong path. Or maybe I should say the path that FFIC has been following is now known to be the wrong one.

Saturday, 6 February 2010

Hodgman's Reagonomics

 ABC News (HERE) reported Will Hodgman as saying the Greens’ policy would bankrupt the state.

The Tasmanian Opposition has ridiculed the Greens for promising to abolish poker machines.

Tasmanians lose about $220 million a year on poker machines, while the Government reaps about $55 million in revenue, or 7 per cent of State tax receipts.

The Greens say they want to phase out pokies within five years, leading to fewer problem gamblers and big savings.

However Liberal leader Will Hodgman is sceptical.

“Most Greens policies are right out there in the Never-Never, they bear no practical resemblance to what’s achievable…......... it’s very easy for Mr McKim to come out and make these wild statements [but] how is he going to bring these policies into effect, without bankrupting the state.”

It is not immediately clear why abolishing land tax of about $80m or 10% of the State’s tax receipts over 8 years won’t create an even larger problem.

Wednesday, 27 January 2010

Our economic black hole

Most discussions about economic issues, and the state of the State is no exception, usually resort to what Paul Krugman in the preface to his breezy offering The Age of Diminished Expectations described as ‘up-and-down economics.’

Professor Krugman said:
“Up-and-down economics is what one encounters on the business pages of newspapers, or for that matter on TV. It is preoccupied with the latest news and the latest numbers, hence its name:”According to the latest statistics, housing starts are up, indicating unexpected strength in the economy. Bond prices fell on the news…” This kind of economics has a reputation for being stultifyingly boring, a reputation that is almost entirely justified.”

But it’s all we get in Tassie. See for example award winning journo Sue Neales tackle an analysis of the latest Mid Year Financial Report released just prior to Xmas HERE:).
It’s little wonder that the level of debate that we are now experiencing and will have to increasingly endure over the next 2 months not only causes boredom but it fails to explain our predicament leading up to an important election for this State.