Thursday, 16 February 2012

Ta Ann as saviour

Malaysian owned Ta Ann was lured to Tasmania with grants and assistance ostensibly to add more value to native hardwood timber than the woodchipping option.
The company now finds itself at the centre of heated public discussion about the possible over cutting of native forests. Environmental groups have take action to disrupt market to bring pressure to bear upon Ta Ann.
Your correspondent Wishy asks: “what evidence do the MLC’s or any other Ta Ann supporters have that NGO information campaigns are actually what has impacted Ta Ann’s profitability and led to the shut down of capacity? Has anyone looked at Ta Ann’s financials in this regard? Are they available for scrutiny?”

The answer to the last part of the question is ‘yes’. Ta Ann Tasmania Pty Limited files annual financial statements with ASIC each year.

The latest report for the year ended 31st December 2010 reveals a company turning over $37 million pa with total assets of $82 million. It employed 133 people.

That’s the good news.

TAT’s gross profit was a negative $5 million. In other words the direct manufacturing costs including wages and payments to FT exceeded the revenue by $5 million.

After overheads of $9 million and other adjustment for finance and FX the overall loss was $11 million.

The operating cash flow was also negative, this time a negative $9 million. TAT survived by a cash injection from a related party.

As is common with forestry companies, TAT was in breach of lending covenants so all of its bank debt was classified as current as it was repayable immediately.

This of course led to the all too familiar sight of a forestry company struggling to satisfy the going concern basis.

The bank debt of $10 million was repaid shortly after the end of the year with a cash advance from an associate; hence Directors were able to sign a solvency declaration.

TAT’s woeful cash flow also meant it was unable to pay trade and other amounts to associates, and $20 million out of a total of $26 million was converted to equity, more shares were issued in other words.

TAT’s assets of $82 million are virtually all represented by a TCFA grant of $9 million yet to be written off and loans and equity from offshore associates. To date $18 million of equity has been eaten away by losses.

But the Sugar Daddy so far has been able to help when needed.

There are no overall winners if losses continue. And of course the social losses are much larger, because there is no way FT makes a cash profit from its sale to TAT of 300,000 tonnes. If it did it would be crowing from the rooftops. What’s the stumpage return… $35? FT won’t ever tell us and I’m not sure? Say $10 million in total? Overheads? Roads? Replanting? Not to mention the ‘costs’ of the fallen trees entrusted to FT by us the benevolent owners, which FT conveniently and continually ignores.

In short, TAT is a dog, unprofitable, cash flow negative and completely and utterly dependent on overseas associates.

I’ve yet to see this model paraded as a desirable basis for a long term sustainable industry.

From a public policy perspective I’m not sure it’s an appropriate issue at this time for people to take such a critical stand.

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