Australia: Plantation shutters

The Australian | 22 October 2011
Medium_858378-111022-timber
A fungal infection and the devastation after Cyclone Yasi are the reasons given for the divestment of Elders' forestry assets. (Photo: Bloomberg)

By LIZ COTTON

TWENTY years after it entered the forestry industry, Elders has begun selling its plantations in Queensland before a staged divestment of all the company's forestry assets, totalling 50,000ha across the country.

The Australian-owned agribusiness giant has signed contracts for the sale of forestry land in central and northern Queensland to the value of $19 million.

Elders Brisbane agent John Burke says since starting an expressions-of-interest campaign for the company's properties, about half have been sold. Twenty-four properties stretch from Miriam Vale to Proserpine along central Queensland's coast and 28 are around Tully and Innisfail.

"We have received good inquiry on the properties, with some currently under negotiation," he says.

"The majority of inquiry and sales has been to private Australian buyers and we are negotiating with some commercial interests."

Burke says there has been offshore interest from Chinese government-owned COFCO and Asia's leading agribusiness group, Wilmar International.

The two are in a bidding war for Proserpine Sugar Mill.

Wilmar owns Sucrogen (formerly CSR Sugar), while Tully Sugar was recently bought by COFCO. The expression of interest campaign on the north Queensland properties ends on October 28.

Much of the land purchased is expected to be planted with sugar cane, bananas or returned to beef grazing. The central Queensland properties are likely to be returned to grazing.

Elders investor relations general manager Don Murchland says the decision to sell the company's forestry plantations in Queensland "has been on the cards for some time, following a series of unfortunate events".

"Some of the trees were hit with a fungal infection a couple of years ago and, combined with the damage caused by Cyclone Yasi, the plantations became unviable and the decision was made to terminate them and sell the land," he says.

Elders Forestry is one of Australia's largest hardwood plantation forestry managers, with more than 170,000 plantation hectares under management across Australia, of which 50,000ha is owned outright.

The sale of plantations includes 20,000ha in central Queensland and 6000ha in northern Queensland, formerly planted with teak and red mahogany; blue gum plantations including 2500ha in the "green triangle" in South Australia's southeast and southwest Victoria, 11,000ha in Esperance and 10,000ha in Albany, southwest Western Australia; as well as 1100ha of Indian sandalwood, grown in Kununurra's fertile Ord River irrigation area in northern WA.

The fall of managed investment scheme sales, the high Australian dollar and uncertainty surrounding woodchip price negotiations with Japanese buyers following the tsunami, along with environmental damage to, and poor performance of, some assets has underpinned the decision by Elders to leave the forestry industry.

"The deterioration of the woodchip market meant that the case for us continuing was not what it once was and we want to achieve the best result for our investors," Murchland says.

Australia's commercial forestry sector continues to undergo a transformation on the back of the managed investment scheme blue gum boom and bust and the collapse of the two largest companies, Great Southern and Timbercorp, estimated as having 43 per cent of all managed investment scheme business in Australia. They fell within two months of each other in 2009. According to a recent Rural and Agribusiness Research report by Colliers International, about 269,000ha of freehold land once held by Great Southern sold this year to Canadian and Australian consortium Alberta Investment Management Fund and New Forests for $415m.

By area, the sale represents the largest private forestry estate transaction in Australia.

In 2009, US-based investment group Global Forest Partners, trading as Australian Bluegum Plantations, purchased Timbercorp's forestry assets for $345m. The sale included 92,000ha of plantation, 39,000ha of freehold land, leasehold rights to 53,000ha and business infrastructure.

The forestry sector is also facing an uncertain future after it was left out of the government's carbon tax and carbon farming initiative legislation.

"It is very much a missed opportunity and we will be campaigning to see commercial forestry included under the legislation," ABP green triangle regional manager Mark Diedrichs says.

In its report, Colliers also notes other troubled companies in the sector including the Willmot Group, placed in administration in October last year; Rewards Group and Ark Fund, now both in receivership and in the process of selling 12,000ha of forestry and fruit plantations across Australia; and Forest Enterprises Australia, placed in voluntary administration early last year with debts of more than $200m.

Gunns divested 28,000ha of old-growth forest land in Tasmania last year and announced the planned sale of its core hardwood and softwood sawmilling assets to fund the development of the proposed Bell Bay Pulp Mill in Tasmania.

In June, it sold 42,000ha of softwood plantation in the green triangle to a US-based investor for $107m, with the sale expected to close by the end of October.

Two state governments are also in the process of selling forestry assets, with the South Australian government recently announcing plans to forward sell the harvesting rights of its softwood plantation in the green triangle region.

The Queensland government sold Forestry Plantations Queensland last year for $603m, which included a 99-year licence to Hancock Queensland Plantations, managed by US-based Hancock Timber Resources Group on behalf of institutional investors.
  • Sign the petition to stop Industria Chiquibul's violence against communities in Guatemala!
  • Who's involved?

    Whos Involved?


  • 13 May 2024 - Washington DC
    World Bank Land Conference 2024
  • Languages



    Special content



    Archives


    Latest posts