ASH attempts to correct the record

 

ASH’s response to Four Corners (it appeared in a Facebook post which is pasted below) presents itself as a factual correction. In reality, it is a carefully constructed piece of misdirection that avoids the central financial facts, reframes definitions to obscure economic reality, and omits the single most important issue facing the company - the looming 2027 redemption cliff. Once the structure is laid out clearly, the Facebook post collapses.

ASH begins by asserting that the figures in the program were wrong, claiming that ASH did not receive $61 million in 2017 and that its net position was zero. This framing is designed to distract the public from the actual mechanism of the 2017 transaction. The issue is not whether ASH the operating company received $61 million. The issue is how the private partners acquired control of ASH.

The Victorian Government injected $51.4 million into a newly created holding company, Heyfield Ash Holdings (HAH). HAH then used that money to purchase 100% of the shares in ASH. The private partners contributed $600,000. Five years later, HAH bought back $599,400 of those shares. Their net capital at risk $600. Their control 100%. The value of the assets they gained control over, roughly $51 million, because that was the value of the shares purchased with public money.

To claim our net position was zero is to ignore the entire capital structure. The private partners gained control of a business capitalised almost entirely with public money, while risking virtually none of their own. That is the fact ASH does not want the public to understand.

ASH then insists that the $49 million payment from VicForests and the Victorian Government was not compensation or a subsidy but a penalty payment. This is a definitional dodge. Whether you call it a penalty, a settlement, a failure‑to‑supply payment, or compensation, the economic effect is identical: it was public money paid to keep ASH solvent after the collapse of native forest supply. The financial statements show that the $49 million flowed into HAH, was not generated by operations, and was not earned through sales. It was a transfer from the Victorian public to the private partners’ structure. ASH’s claim that every cent was reinvested is also misleading. Reinvestment was not a choice — it was a necessity because the business was not generating operating cash. Not only that but it was a condition of payment.

But the most conspicuous omission in ASH’s statement is the $33 million redemption liability owed to the Victorian Government — due in June 2027. This is not a minor oversight. It is the single most important financial fact about Heyfield today. That liability has grown, not shrunk, because interest has been capitalised every year. And why has interest been capitalised? Because every available dollar of spare cash has been diverted into the related‑party loan to WJS, not used to service the debt owed to the public.

This is the core structural problem: Public money funded the acquisition. Public money funded the operations. Public money funded the related‑party sawmill. And the public is still owed the money — with interest.

ASH’s silence on this point is telling.

The company then attempts to distance itself from Western Junction Sawmill (WJS), saying:

“WJS is not owned by ASH nor the Victorian Government.”

This is technically true and economically meaningless. The economic reality is that ASH is the banker of WJS — the related‑party loan blew out to $13.5 million after the VicForests payment. ASH is the major customer of WJS — its purchases determine WJS’s viability. WJS is owned by the same private partners who control ASH. And ASH only exists because the Victorian Government provided all the capital to enable its purchase.

To claim WJS is not owned by ASH is pure sophistry. It is designed to confuse the public by focusing on legal form rather than economic substance. The structure is simple: the private partners control both ASH and WJS; ASH is funded by Victorian taxpayers; WJS is funded by ASH; and the private partners control the entire supply chain while risking almost no capital.

ASH’s assertion that we have not gained from this is the least credible claim in the entire statement. The private partners have gained control of a $51 million asset base funded by the public; control of all cash flows; control of a related‑party sawmill; control of pricing, timing, and loan movements; and control of a structure that allows value extraction without equity risk. They may not have gained through equity appreciation — because the government holds 28.35 million convertibles — but they have gained through control of the supply chain. That is where the economic value lies.

ASH also attempts to downplay the Tasmanian connection by saying it buys sawn timber, not logs. This is irrelevant. Whether HAH buys logs or sawn timber, the economic dependency is the same: HAH’s working capital supports WJS; WJS relies heavily on Tasmanian native forest logs; the related‑party structure masks the true cost of those logs; and Victorian public money indirectly sustains a Tasmanian mill. The form of the input does not change the underlying economics.

Finally, ASH rejects the description of native forestry as a zombie industry, claiming that ASH is unique and that imported timber is inferior. This misunderstands what zombie industry actually means. The term became popular following the events in Japan in the 1990s where banks’ liabilities far exceeded their assets (viz. the loans due), and which survived only because interest rates were near zero, sometimes even negative. Uniqueness has nothing to do with it. Product quality has nothing to do with it. Import substitution has nothing to do with it.

By that definition, native forest logging in Australia is the textbook example of a zombie industry. Forestry Corporation of NSW has fully impaired its native forest assets — a formal admission that the assets cannot generate future economic benefits. Sustainable Timber Tasmania (STT)  in Tasmania survives only because it values native forests as a single‑rotation crop rather than a perpetual ecosystem; because it excludes regeneration, roading, and imputed rent from net proceeds; because it pays no rent for public land; because it relies on $12 million per year in Community Service Obligation funding; and because it must draw down term deposits to survive. If STT valued its forests honestly, its net assets would be negative. A business whose solvency depends on an accounting fiction is, by definition, a zombie.

ASH’s own structure exhibits zombie characteristics:  growing debt; capitalised interest; negative operating cash flow; diversion of cash to a related‑party entity; and private partners with almost no capital at risk. The zombie diagnosis is not intended as an insult. It is an economic description — and an accurate one.

ASH’s Facebook response is not a factual correction. It is a strategic omission of the financial realities that underpin the Heyfield–WJS structure. The numbers tell a simple story: the private partners used public money to acquire ASH, reduced their own capital at risk to almost nothing, used ASH’s publicly funded cash flows to bankroll a related‑party Tasmanian mill, and now face a $33 million public debt they have not begun to repay.

Nothing in ASH’s statement changes that.

ASH’ Facebook post: ASH addresses the false claims in the ABC program

Australian Sustainable Hardwoods Pty Ltd (ASH) is aware of a recent program containing misleading, factually incorrect and damaging claims about ASH. We are deeply disappointed and we are actively working through our legal options. Source: Timberbiz

The conclusion of the story was determined before filming began. The program showed heavy bias and ignored facts that did not fit their narrative, including clear, documented evidence supplied to them that contradicted the claims they chose to air.

ASH’s Managing Director, Vince Hurley, participated in a 2.5-hour interview in which he answered every question and allegation put to him. The editing of that interview was, to put it plainly, dubious.

ASH provided access to multiple scientists who specialise in their respective fields. None of this was aired. Instead, the program chose to platform activists with a shared, predetermined view, and in some cases appears to have reworded terminology in ways designed to lead viewers to incorrect conclusions, replacing accurate contractual language with loaded terms like ‘subsidy’ and ‘compensation’.

Timber in Australia is sustainably managed and is the ultimate renewable.

Let us address the facts directly.

The figures stated were wrong

ASH did not receive $61 million in 2017.

ASH received $3 million, which was applied entirely to union-negotiated, enhanced redundancy entitlements for workers. Our net position from that transaction: zero.

ASH received contractual failure to supply penalty payments from VicForests (two years of undersupply) and the Victorian Government (contract withdrawal). This is not compensation. It is not a subsidy. It is a penalty payment that VicForests and the Government was contractually required to make.

The total of penalty payments to ASH was $49 million. That payment was taxed so the total amount received by ASH was $34 million.

Every cent of that $34 million, and more, was reinvested into replacement stock, additional employment, plant and equipment.

The penalty payment ASH received was one third of the revenue that would have been generated if contracted VicForests supply continued.

It was significantly less than what it cost ASH to retool operations, develop new products, open new markets and transition to plantation fibre. We have not gained from this. We have absorbed the loss and continued. Importantly, we have made significant gains in developing markets for plantation hardwood. Something few others have been able to do.

ASH ceasing operations following the closure of Victoria’s native timber supply would have cost the Victorian taxpayer an additional $30 million instead of maintaining employment for over 200 employees in regional communities and strengthening economic activity.

ASH has produced over $500 million in economic activity since 2017 including paying over $100 million in Government taxes and charges. A good result for the Victorian taxpayer.

Western Junction Sawmill (WJS) was purchased in 2021 and is not owned by ASH nor the Victorian Government. WJS is now investing in value added manufacturing on the site.

On wood fibre

ASH does not receive logs from Tasmania. One 100% of timber purchased by ASH from Tasmania is sawn timber from WJS.

WJS purchase plantation hardwood and low-grade regrowth sawlogs produced as a byproduct of forest operations. These sawlogs were destined for export and the wood chip market. Instead, they are upgraded into high-value timber products for Australian consumers.

A good result for forestry, conservation and the Tasmanian taxpayer. There is no increase in harvesting and there is no basis to the claim of a rapid loss of old trees.

ASH has three main fibre sources, and our operations do not survive mainly on feedstock from Tasmanian native forests as implied by the program. The report failed to emphasise the significance of plantation oak, nor mention ASH’s Glacial Oak feedstock entirely. This is not an oversight. It is selective journalism.

On terminology and framing

The episode framed this story as ‘logging versus environmentalists.’ That framing is both misleading and telling. There is no logging in isolation. Logging is one activity within forestry.

Forestry is the science of managing forests for all their values, ecological, social and economic, for the long-term benefit of all Australians. These are not the same thing and conflating them is not journalism. It is a narrative device.

On certification and standards

Every aspect of ASH’s operations is independently, third-party certified as sustainable and fully compliant with Australian Standards.

The opinions of unsustainable practices made by activists in this program carry no such certification and have not been independently verified as factual. They should not have been given equal weight in responsible journalism, let alone greater weight.

Regrowth native forestry and/or plantation forestry do not need protecting from logging. The values that exist in the forest are a result of careful forest management. Not in spite of it. Forestry (not logging) manages the long-term sustainability of forest products.

On the future of the timber industry

Timber is not a ‘zombie industry’ as described in the program. ASH is a business that is unique in Australia. Manufacturing products for which the only alternative is imported timber, often inferior in quality and of dubious environmental origin.

Closing domestic forestry does not help the environment. It exports the problem to countries with lower standards and less oversight.

ASH has navigated an extraordinarily difficult transition: new fibre, new products, new markets, new manufacturing and new production, all in a short period of time, during a cost-of-living crisis, in a depressed market. We have come through it.