Thursday, 17 September 2009

Financial illiteracy

 “Treasurer, is the Budget blowing out again”, asks Peter Gutwein, Shadow Treasurer in a Press Release dated 15th September 2009. “Last year, in the midst of the Global Financial Crisis, the State Government managed to spend $311 million more than it budgeted”.

Quite correct. Mr Gutwein must be reading from page 10 of the Preliminary Outcomes Report released 14th August 2009.

But then Mr Gutwein says “(t)his was despite Tasmania losing nearly $220 million in revenue in 2008-09.”

That is incorrect. Revenue was $103 million higher in 2008/09 than budgeted not $220 million less.

Mr Gutwein then intones“(w)e need financial leadership and vision, not spin and poor management”.

Agreed, but we also need people who can read a simple set of accounts.

Tuesday, 1 September 2009

Accounting for dummies.. a look at Forestry Tasmania

Media releases which accompany reports such as FT’s 2008/09 annual financial statements usually attempt to mislead rather than inform. The reliance on PR people who are obviously quite limited when it comes to interpreting economic and financial statements isn’t exactly designed to logically and coherently explain FT’s current situation to stakeholders.

Tuesday, 18 August 2009

Where did all the money go?

Where did the money go? The perennial question every time a company heads into bankruptcy.

It is of particular interest in cases of failed MIS companies for anyone trying to assess the effectiveness of the MIS model and the efficacy of Government policy in the important area of land use.

The recently fallen Great Southern Limited (GSL) represented 30% to 35% of the MIS industry in turnover terms. Whilst it has operated since 1987 it didn’t list on the ASX until 1999. There’s reasonably good data available from 1st July 1998 until 30th September 2008 which may shed some light on how the MIS industry has operated.

Tuesday, 4 August 2009

More info please

I agree with Matt ( Why there was no doorstop ). Avoiding doorstop interviews are minor misdemeanours.

Provided the Premier maintains continuous disclosure.

The Premier’s recent speech to the Party faithful echoes much of the State of the State speech in March 2009.Consider the much vaunted irrigation proposals (in March), which “revolves around the creation of a Statewide water economy to make Tasmania a foodbowl for Australia. “

Wednesday, 22 July 2009

PAL policy

The election campaign has already started if the weekend’s press reports are any guide.

Mr Will Hodgman will certainly bring a fresh approach to policy making if he replicates his recent parliamentary performance in the matter of the PAL policy.

The State is now without a Protection of Agricultural Land (PAL) policy.

Saturday, 27 June 2009

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).
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.

Tuesday, 23 June 2009

Voodoo economics

Consultants are often willing to write reports to support floundering arguments. The forest industry's commissioning a report comparing the assistance it receives with other industries is a case in point.

At first I thought it (see Brucey hits back for forestry) was written as a spoof.

Or maybe similar to the recent Sunday Tasmanian Op Ed piece that was riddled with errors from the very first paragraph, designed as an educational exercise, encouraging students to spot the incorrect facts, identify the non sequiturs and the sophist techniques with a view to honing their skills.

Tuesday, 9 June 2009

Gunns after the deluge

Surviving MIS companies Gunns and Forest Enterprises are at pains to distance themselves from their fallen comrades, Timbercorp and Great Southern.

The boss of Gunns Plantations Ltd Ian Blanden was reported in Business Spectator on 25th May 2009 as saying,“(o)ur business model is very different ………. We are a forest products company who have established an agribusiness investment or forestry investment arm. We’re not an MIS company………..we’re an end user looking for a resource, not a resource searching for an end user and we have a very diversified source of revenue, MIS making up somewhere between 10 and 15 per cent of our annual revenue to the Gunns group.”

Tuesday, 2 June 2009

Wither FEA?

Gunns have been trying to point out ( Gunns after the deluge ) how they differ from the recently fallen Timbercorp and Great Southern.

What about Forest Enterprises Australia Ltd (FEA)? Any similarities?

GFC: an accounting parable


Economics has been squeezed out of most business studies courses and as a consequence recent graduates have little understanding of macroeconomic events. The following is the first draft of a paper which attempts to explain credit formation, derivative products and the ensuing GFC, from an accounting perspective, presented to  business studies students. Whilst a simple model beloved by economists is used, the major point of is to interpret what happened from an accounting perspective.

Tuesday, 5 May 2009

Decision time is nigh

The woodchips that will come onto the market in the next few years from Timbercorp and Great Southern woodlots will be at the behest of administrators and managers trying to wind up the MIS structures. This will help suppress Gunns’ woodchip price already under stress from the effects of the current global crisis which has seen all commodities suffer price falls. Most commodities are in excess supply now so the rapid rise in price in the future is unlikely.

A triumph for absurdity

In December 2008 Tasmanian Times reported on the Race to the Bottom for MIS companies. “(They) are continuing their inexorable journeys towards a catastrophe. Not all will survive intact……..Great Southern Plantations (GSL) seems to be at the head of the peloton at this stage…….Joining GSL in the race to the bottom has been Timbercorp”.

Gunns too are selling assets to pay off debt.

What’s the current situation?

Friday, 24 April 2009

MIS fallout

Discussion of MIS companies like Timbercorp (which hasn’t invested in Tasmania) as well as the local exploiters like Great Southern, Gunns and Forest Enterprises assumes continued MIS investment in plantation trees.

But MIS investment has shrunk over the last 6 months and the next few months doesn’t look promising. A lot of MIS Companies have stopped spruiking. Some are in serious trouble.

Tuesday, 7 April 2009

Hobart airport sale


The Airport sale continues to attract sporadic comments. After reviewing the deal, there doesn’t appear to have been any gross breaches as has been alleged by some.  Just a series of events that were beyond the usual experiences of most of the participants. The Govt did ok, by default rather than good management although they’ve been terribly evasive.  Lennon’s legacy. Some of the proceeds may eventually return to RBF should the airport investment disappoint and lead to an increase in the unfunded superannuation amount required to be paid by the Government. Parliament provided little scrutiny, the Libs dithered and the Greens went searching for the sensational headline. RBF probably paid way too much and have been too defensive as if trying to hide something. The paper shufflers did handsomely out of the deal.

What is interesting is it provides a good example of how privatisation works and how the Macquarie model operates. At a macro level Governments may receive a cash boost, but from an overall social viewpoint, total debt simply increases. And that is what has brought the world to its knees.

Super funds’ investing in heavily geared entities is a recent phenomenon. Fortunately the glory days for such behaviour appear to have come to an abrupt end. Trustees were under pressure to emulate their peers whose performance was boosted by forays into unlisted geared entities.

Trustees although not bound by the continuous disclosure requirements of listed Companies, nevertheless owe it to their Members to keep them informed. It is not evident that RBF has done this with unlisted investments. By their nature unlisted entities tend to be a little more secretive.

Tuesday, 24 February 2009

Great Southern to quit Tassie

Great Southern held their AGM on Thursday 19th February 2009 at which they announced plans to quit Tasmania. They reviewed a tough year for the company. Their woes are typical of the MIS industry. The Chairman and the Managing Director addressed the meeting. The full address can be found on the ASX website ( ) but like all such addresses is very much a sanitised view of events. An earlier draft of the address has been ‘discovered’, a draft before the usual sanitisation and omission of facts and the application of gloss by spin doctors.

Tuesday, 10 February 2009

A better way forward

Thirteen months away from a crucial State election, and the Messiah is yet to appear. Dominated by forestry and Tarkine issues, it is sometimes easy to forget about some of the other matters that bear upon the lives of mortals. Like dollars and cents and hospitals. So it was pleasing to see Alex tackle the neglected subject, and review the State’s Mid Year performance for the period ended 31st December 2008 ( The State Budget update: Panic or celebrate ). But there was little I could agree with, neither his description of the current situation , nor his proposed solutions.

There currently exists a sound base for the future, if only there was a greater willingness to understand the present. And also a greater willingness of the Government to reveal the options for the future. And a greater desire by those in Opposition to do more than merely oppose.

Saturday, 7 February 2009

A response to Great Southern

There was disturbing unreality about Great Southern’s Mr Ikin reply (Your Say January 30th) to my letter on land tax in general and GSL’s Temma property in particular.

Mr Ikin is still reading from an old copy of GSL’s psalm book.

GSL reported on their website in October 2008 that “extensive areas of this plantation have failed and the majority of the failed areas are yet to be replanted……..approximately 36 hectares of this area will not be replanted.”

This differs from Mr Ikin’s assertion that only 14 hectares failed and it has all been replanted.

GSL has also allowed its cattle to graze the property inflicting great damage to the seedlings already battling to survive adverse conditions.

Thursday, 29 January 2009

Forestry Tasmania's delusions

Ill informed claims and counter claims are by no means endangered species in the forestry debate. The interpretation of finance and economic statistics is often a cause for concern, even alarm. Usually one can safely turn a blind eye to the PR boys when they venture into areas of ‘benefits of Project A’ or ‘economic value of Industry B’. But when the executives involved in some of the decisions enter the public arena with similar fatuous claims, it is little wonder how confusing it is to interested observers.

Dr Hans Drielsma, the Executive GM of Forestry Tasmania (FT) in a letter published in the Mercury on 22nd January 2009 under the heading ‘True economic value’ attempted to argue that the true economic value of the State’s forestry industry can be measured by reference to its annual turnover.

Friday, 16 January 2009

Rates land tax and plantations

Do MIS companies pay their fair share of municipal rates?

The answer in short, is they are given special treatment which allows them to pay lower rates than other farmers. But it is in the matter of land tax where the State Government has been seriously remiss. Many of the failed and failing MIS schemes are arguably not entitled to land tax exemption which has always been granted in the past.

Monday, 12 January 2009

Special treatment for plantations

One of your correspondents in a note titled “Does Gunns pay rates” again raised the question whether plantation growers pay their fair share of municipal rates.

The answer in short, is they are accorded special treatment with respect to their assessed level of rates. But it is in the matter of land tax where the State Government has been seriously remiss. Many of the failed and failing MIS schemes are arguably not entitled to land tax exemption which has always been granted in the past.

Great Southern heads further South

Great Southern (GSL)continues its search for cash to enable it to survive 2009 after a tumultuous decline in its fortunes during 2008.The Plan to purchase 6 tree projects and 2 cattle projects from investors in exchange for GSL shares was aborted in Dec 2008 when the value of GSL shares fell as low as 12.5 cents. GSL will try again to get approval from investors and shareholders in the last week of Jan 2009. The shares are currently trading at 17.5 cents, not much improvement.

This time the Independent Directors had no alternative but to recommend against the Plan in respect of the 1998 Project which is currently being harvested. 1998 investors can wait a few months to receive $2,300 cash or accept GSL’s offer of 4,606 GSL shares currently worth $800. No need for a calculator.