GNS - Gunns Limited

[drsmith]

I've no idea how a business with these numbers could in any way have "credit issues"

http://www.gunns.com.au/Content/upl...esentation Half Year Results Announcement.pdf

Underlying EBIT is less than interest expense in the latest half.

The forest products part of the business seems to be the main culprit in the collapse in underlying EBIT so the question is whether EBIT is expected to recover of it's own accord.

A strategic review by the directors would suggest not.

 

[So_Cynical]

The forest products part of the business seems to be the main culprit in the collapse in underlying EBIT so the question is whether EBIT is expected to recover of it's own accord.

Chip exports in Uruguay fell over 60% in 2009...so in comparison the chip business here held up pretty well with a 25% (approx) fall in volume.

I love it how a couple of bad months means its the end of the world for Gunns and the global chip industry, and of course the global pulp and timber industry's...because if Gunns as the biggest exporter of chips in Australia (the leading export country) cant go on, then its gota be the end everywhere.

And of course that's a crock.

I remember when ILU - Iluka closed one of there kilns about 10 months ago due to falling global demand and prices, the SP hit a new low and i jumped all over it 2.90 something...well that kiln is still off line and the SP was 4.15 the other day.

 

[drsmith]

I didn't say it was the end of the world for Gunns.

The latest half's EBIT does however raise concerns that warrant the investigation of further information beyond that contained in the above 1/2 yearly presentation before investment can be considered even at the current share price.

Mr Market could well be right.

 

[gigiknightfox]

As I see it Gunns certainly has it's ongoing issues. Low chip sales will continue into the second half with 8 week shutdowns being experienced at two out of their three facilities. Maturing $40 mill debt shortly. Circa $180 mill capitilsed on the pulp mill which may or may not proceed. Chairman under increasing pressue to resign. Challanges with the ITC intergration. Doubtful that it will be able to offer any sort of MIS product this year. And if that isn't enough, banks especially CBA have an increasing dislike of the sector. There is obiously long term potential for the company, but this will be certainly depandant on seeing out these short term issues.

 

[So_Cynical]

As I see it Gunns certainly has it's ongoing issues. Low chip sales will continue into the second half with 8 week shutdowns being experienced at two out of their three facilities. Maturing $40 mill debt shortly. Circa $180 mill capitilsed on the pulp mill which may or may not proceed. Chairman under increasing pressue to resign. Challanges with the ITC intergration. Doubtful that it will be able to offer any sort of MIS product this year. And if that isn't enough, banks especially CBA have an increasing dislike of the sector. There is obiously long term potential for the company, but this will be certainly depandant on seeing out these short term issues.

Issues = opportunity for those 'whatever' enough to see past the issues to the future.

into Gunns today at 0.535.

1 week later and the 0.53 cent bottom has held and the SP is slowly creeping up...ive a feeling ill be exiting in profit allot quicker than i expected.

 

[qualos]

Not holding too well at the moment. $0.465 It also looks like it may drop further yet. It has been dropping very fast.

 

[So_Cynical]

Not holding too well at the moment. $0.465 It also looks like it may drop further yet. It has been dropping very fast.

Got to 0.455 at one point then must of had a bit of a rally to end up at 0.50 for the close. :dunno: GNS isn't the first trade to go against me and it wont be the last.

Stocks go up, stocks go down...buyers and sellers at all levels, i would be keen to take an average down/re-position if the SP held below 0.45

 

[Smurf1976]

Seriously any green coalition Govt that went about destroying the forestry industry would simply be self destructing, and would be turfed out in the resulting election.

Still sometimes people need to learn the hard way....what do you think the outcome will be Smurf?

OK, the vote counting is almost complete and it seems to be 10 Labor, 10 Liberal, 5 Green.

1. Assuming a Labor / Liberal coalition is not an option, the new government will be either Labor-Green or Liberal-Green. So it's near certain that the Greens are part of the next government.

2. Based on public comments from the (Labor) premier before the election, it seems that Labor will not retain power if the Liberals win equal seats with more votes or more seats than Labor. The Liberals seem to have won equal seats with more votes.

So the probable/I] outcome is a Liberal-Green government.

My guess is it works fine for a couple of years and then falls apart. I say that noting that Tasmanians historically haven't liked Liberals - their relatively high vote seems more a protest against Labor than support for Liberal as such.

Historically, we've had one Labor-Green and one Liberal-Green government, both of which fell apart a bit after two years. Labor-Green fell apart partly at the hands of forestry issues, Liberal-Green over a whole range of issues although the proposed privatisation of the Hydro was the issue which dominated the following election campaign which saw the Liberals effectively reduced to minor party status.

But the Greens are desperate to show themselves as responsible and able to govern. And of course Labor could side with the Liberals to back any pulp mill specific legislation as the Greens have already publicly noted.

My best guess is that we end up with essentially Liberal policies being implemented exept:

1. Some forests somewhere will become proteced. Not all forests, but some. Worth noting in that context that over 40% of the entire land mass of Tas is already formally protected.

2. Pulp mill sent back for a proper non-political assessment process (lack of which is the major objection many have to the proposal).

3. Additional funding for public transport.

4. Some sort of incentive to install solar panels on houses, probably in the form of either a one-off grant or a high rate feed in tariff.

5. Possibly, a no privatisation stance particularly in relation to hospitals and anything in any way associated with the Hydro (but not necessarily Transend or Aurora).

6. In the event that it ends up being Labor, not Liberal, in government then some sort of "good governance" scrutiny process.

Other than that, basically a Liberal government assuming they do take office. Otherwise, a Labor government also subject to the above points to keep the Greens happy.

 

[So_Cynical]

Thanks for your thoughts Smurf and well summed up...and pretty much spot on with your analysis, at least in my mind.

I saw the Greens leader on Q&A this week and he came across as more inclined to want a Labor partnership (didn't exactly say that thou...of course) and from a Gunns point of view, he agreed that all the legislation for the mill has already been passed and that the mill could now run on 100% plantation timber anyway.

So im inclined to agree with you that there will be more forests locked up as a political bargaining tool, and over time native forests will be slowly withdrawn from logging...and that's to be expected as its happened everywhere else already, greens just cant govern, they just cant do the compromise thing.

 

[charttwit]

GNS is struggling to go down, it is close to a 50FS&R, its current angle of achievement is obtuse, offer is holding price up, time is also up this week. will post a chart yet when post count up to 5

 

[Joe Blow]

GNS is struggling to go down, it is close to a 50FS&R, its current angle of achievement is obtuse, offer is holding price up, time is also up this week. will post a chart yet when post count up to 5

Charttwit: You don't need to wait until five posts to attach a chart to your post. Just upload it directly by clicking on the "Manage Attachments" button when you post. See attached image.

 

[Smurf1976]

I noted with interest on election night that Paul Lennon, former Premier of Tas (not that long ago...), seemed very confident that old growth logging would not be an ongoing issue for the next government.

Given that Paul would obviously have just about all inside knowledge on the subject that is available, I can only assume he doesn't expect such logging to continue regardless of the election outcome. Presumably that expectation is based on underlying supply from plantations and the economics of the industry.

I note that this implies that plans for a wood-fired power station or two probably won't eventuate either. That, more than a pulp mill, is something the Greens are opposed to very strongly.

Forest industry of some sort - yes.

Reduction in old growth logging - yes, the question being to what extent and how quickly.

Pulp mill - if it's assessed properly and they really do want to build it then I don't think the Greens (as distinct from general conservationists / protesters) will really stand in the way. The key point here is an independent assessment, without which the Greens couldn't possibly do anything other than oppose the mill from a political perspective.

Wood-fired power - given that wind, gas and imported (from Vic) coal-fired power are all cheaper and that conservationists even seem more willing to consider new large dams (!) than burning wood, I can't see a wood-fired power plant being built. I won't turn this into one of Smurf's energy threads, but suffice to say the entire concept and business model only stacks up as a means of cutting losses, and then only if you assume we're going to log the forests anyway - an idea which the Greens certainly don't take as a given. Plenty of people have examined the concept over the past 30 years, myself included, all of them rejecting it as not even close to being viable economically other than in the context of some type of make work scheme. But I can't see a government needing Green support trying to make work, whilst losing money, by logging forests...

 

[charttwit]

hopefully a chart will appear, its a transaction and time based chart only but u should be able to see what i am saying

 

[boofhead]

Gunns seems to be having a few battles to fight at once.

The pulp mill and costs against falling profits.

Some major shareholders are unhappy with the board.

Gray is being chased for poor disclosure of share buying (late lodgement.)

Various Gunns operations are again going through forced shutdowns because of lack of demand.

Exchange rates are going against Gunns. Makes it harder to compete in the woodchip business.

I'm not sure but I think I read new building figures are down. Gunns supplies some timber to that market.

Lennon probably thinks the timber industry will be further rationalised/downsized during the upcoming electoral term. With lower demand and plantations maturing there will be far less need to log native forests.

BTW I think Liberal will govern in minority instead of with the greens. For timber industry proposals Labor will support them so best leave them to later in the term where possible to keep the greens on side for other issues. Greens and Labor seem a better fit as they're more lefty than the Liberals.

 

[awg]

The leader of the Greens seems to talk sensibly, so maybe all the bad "green" news was already factored in.

If Gunns muck things up, quite likely will be internal mismanagement, as much as anything else.

The credit risk I refered to is mainly re GNSPA, where didvidends could be suspended in the event of a combination of Gunns EBIT falling, and Pulp Mill not getting financed, so they would have to swallow that, and covenants may be breached. I note though that Fiig has a buy on GNSPA.

Where there is risk, there is potential return, so good luck with the buy So_C, a value buy to be sure, too brave for me yet.

I have both on my watchlists

 

[So_Cynical]

Gunns released a market update after the close on Friday that included a small guidance downgrade.

http://www.gunns.com.au/Content/upl.../2010 04 23 - ASX Release - Market Update.pdf

I'm really not sure if this is a good ann or a bad one...guidance to one side, selling the native forest land should bring in over 75 mill, the Mitre 10s (i think there's 5 of them) what 35 mill? and the shift away from native forests should be seen as a long term positive...and pulp is still worth 3 or 4 times what chips are worth.

http://www.theaustralian.com.au/bus...r-reorganisation/story-e6frg8zx-1225857634653

 

[oldblue]

I agree that the shift away from native forests and the heightened environmental concerns around them should be positive for GNS in the long term.

I'm not buying them now but will be looking for an opportunity when market sentiment - and the SP trend - turns around.

 

[So_Cynical]

I agree that the shift away from native forests and the heightened environmental concerns around them should be positive for GNS in the long term.

I'm not buying them now but will be looking for an opportunity when market sentiment - and the SP trend - turns around.

Yes i think i got in a little early, as a revisit to 0.46 is probably on the cards now, anyway by the time an up-trend is established you'll be buying at over 60 cents...i mite put in a buy at 0.41 for Tuesday morning, any things possible.

 

[Smurf1976]

Gray is being chased for poor disclosure of share buying (late lodgement.)

...

BTW I think Liberal will govern in minority instead of with the greens. For timber industry proposals Labor will support them so best leave them to later in the term where possible to keep the greens on side for other issues. Greens and Labor seem a better fit as they're more lefty than the Liberals.

Given Gray's past performance as a poltician, virtually bankrupting an entire state, let's just say I'm none too impressed with his financial abilities.

Environmentally, he'd dam the lot and log the rest...

As for governments, the actual outcome is a proper Labor-Green government as such. That is, a government with both Labor and Green ministers as distinct from simply having a minority Labor (or Liberal) government supported by the Greens. All I can really say on that one is it will be interesting to see how it goes and I wouldn't like to guess. Gut feeling is it might just work out OK...

 

[GumbyLearner]

Gunns shares rally two days in a row this time including takeover talk

http://cn.wsj.com/gb/20100531/BCH004039.asp