Gunns profits halved as Bell Bay project awaits investment

The company made the announcement in its 2009/10 financial results, which showed a 49.3% drop in net profit to $28.5m for the year.

The second half of the financial year was considerably stronger than the first, as net profit for the six months ending 30 June was $28.1m, up from $400,000 in the six months ending 31 December.

Revenues for the full year dropped 8.5% to $704m, while underlying earnings before interest and tax (EBIT) dropped to $51.4m.

Gunns chief executive Greg L’Estrange said: “Trading conditions had been extremely difficult in the company’s key markets throughout the 2010 financial year and had caused the depressed earnings for the reported period.”

The company said “three interested parties” are currently undertaking due diligence in relation to an investment in the mill.

“On the ground the project is being held in a ready status to allow us to efficiently commence construction on financial close. Work in respect of the maintenance of environmental permits is on-going,” L’Estrange said.

“As was noted at the half-year results announcement, the recent market for export woodchips has reinforced the merits of a sustainable, plantation-fed mill – in a period where wood fibre value has remained static in real terms, pulp value has increased significantly with a strong outlook.”

Gunns has obtained all but one of the environmental approvals to build the Bell Bay mill and been given the go-ahead to begin construction by the federal government, but has yet to secure a financial backer.

The company had been expected to announce a financial partner for the mill over a year ago, but has struggled against the tough economic backdrop.

The company announced a financial restructure of the project in February, as it posted a staggering 98.7% fall in profits in its half-year results.

John Gay stepped down as chairman of the company in May.

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