FEA update

Forest Enterprises (FEA) announced to ASX on 26th June 2009 a lower than expected MIS sales figure for the almost completed year 2008/09(FY09). http://www.asx.com.au/asxpdf/20090626/pdf/31j8mn9qqfyr3x.pdf
And a lower than the hankered figure as per the ASX announcement of 27th May 2009.

The “sales are likely to be significantly less than the $60 million achieved in FY06 and FY07”.

Significantly less, that’s an unequivocal statement.

Last year 2007/08 (FY08) MIS sales were $114.5 million.

The ASX announcement goes on to say that “FY09 revenues from timber sales and plantation establishment expenses are expected to exceed those from FY08.”

TT readers (see Whither FEA? ) will be alert to the spin, to the difference between ‘sales’ and ‘revenue’.

MIS sales in one year, although received in cash are not fully included as revenue until plantation establishment which may not occur for 12 months.

Of the $114.5 million in MIS sales for FY08, $57 million will be returned as revenue in FY09. Some FY09 MIS sales will also be returned as revenue for FY09, but at least 50% won’t be included as revenue until plantation establishment in FY10.

Hence the claim that FY09 revenue from timber sales (from the Bell Bay sawmill) plus plantation establishment, will exceed the levels achieved in FY08, could be a little misleading, as $57 million of FY09 revenue relates to FY08 sales, and the Bell Bay sawmill experienced teething troubles in FY08 making the comparisons a little unfair.

It’s the net cash inflow that’s important, not the gross revenue figure that might include sales from a prior period.

The cash from FY09 MIS sales might not be enough to sustain the Company into 2009/10.

Which makes land sales essential.

FEA’s share price is 14.5 cents, roughly a 25% fall since Great Southern’s demise.

The market capitalisation is currently $60 million.

Stand by for an announcement from Gunns.