Controversial Tassie logger Gunns Ltd’s AGM went off with far less controversy than our man on the spot expected.
The front page headline in The Mercury on the day had The Wilderness Society meeting Gunns woodchip customers earlier in the week to acquaint them of the fact that Gunns clearfells, chips and exports around 5 million tonnes of old growth forest each year – not plantation wood as the Japanese say they believed.
The Society also planned a demo outside the head offices to coincide with the AGM.
In the event, all was quiet. The demo folks did their duty in front of the cameras, standing in two neat rows, holding placards. The two police officers earned their keep by looking on dutifully.
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Inside, around 90 people sat themselves on plastic chairs in an unventilated, narrow room at the rear of the offices, the sound of the planing mill and the reversing beeper of the forklifts moving timber in and out of the drying kilns intruding through the heavy curtains.
As I looked at the gum veins in the parquetry floor, I concluded that if nothing else, Gunns are not ostentatious. On further reflection, I think the floor timber was probably of lesser quality than the wood sold for a pittance for chips.
Around 12 ethical investors installed themselves at the back of the room, and from them we expected some action.
The Executive Chairman, John Gay performed the ritual: revenue up, profit after tax up, outlook looking up. No mention of earnings per share being down.
Then he handed over to one of the staff who for more than 15 minutes took us through the good news of the coming Australian Forestry Standard. Now the AFS is likely be a worry for some, principally those good folk at Standards Australia who are likely to put their imprimatur on it. Trouble is, more than a few people think the development process of the draft AFS leaves much to be desired: the few conservation groups (compared to the many industry groups) who took part have refused to sign off on the draft version.
The all’s-well-for-the-future presentation over, the E.C. called on elections for the two retiring board members, and then invited questions on the accounts.
Ethical Investor #1: the Annual Report does not show the profitability of revenue streams. There is no indication of revenues from woodchips or other wood products. In the Primary reporting segment, segment revenue is separated into Forest Products, Managed Investment Schemes and Other. What is the percent of profit of the three streams?
Executive Chairman: the segment results have been reported in line with accounting standards and the auditors have approved
E.I #1: You have not answered the question. What is the percentage of profit of those three segments.
E.C.: The segment results are shown in the second line of those accounts.
E.I. #1: So net profit after interest is not available for Forest Products, Managed Investment Schemes and Other?
The two retiring directors having been declared elected with the required majority, the E.C. called for questions in General Business and from my record, eleven were from ethical investors, three were Dorothy Dixers and two could be classified as other, one asking about a survey of log truck safety done some years ago and apparently pigeon holed.
Of the ethical investor questions, several were taken on notice and others were parried. One was refused an answer:
E.I.#9: In regard to woodlots, of the approximate $4,000 for a woodlot, how much is used for the costs in putting the trees in the ground, how much is for ongoing management fees, how much is paid to financial advisors and how much appears as profit to Gunns?
E.C. : That is commercial in confidence. The information belongs to the company
Several questions on sustainable old growth logging were parried and put on notice, the following exchange being an example:
Ethical Investor #2: Your Annual report, on page 10 states that ‘Gunns is committed to Sustainable Forest Management that is environmentally sound, economically viable and socially desirable’….. Does it follow then, that Gunns regards the clearing of rainforest as environmentally sound and socially desirable?
Executive Chairman sought the answer from a company advisor.
Answer: the Federal government had spent $400 million and Tasmania had done a comprehensive review of the industry with the Comprehensive and Representative Reserves being the result. We operate in the Multiple Use Forest, which was sanctioned by both the State & Federal governments. We operate in the area for social and economic benefit of Tasmania.
Comment and question from E.I. #3: Gunns deals in a low value recovery rate on a large volume of wood. There is an extraordinarily large harvest and a similarly extraordinary low rate of value recovery. How much have Gunns contributed “directly and indirectly” to the major parties.
E.C. : There is public disclosure through the electoral system. It is there for all to see.
E.I. #4: With respect, the previous question about “the sustainability of logging rainforest” was not addressed. How does the company view the sustainable logging of rainforest?
E.C. : I believe that question has already been answered; the company operates within the law.
E.I. #4 : We have heard of your legal rights to log land and about bipartisan support from the major parties but you have not answered the question about the “sustainability” of logging rainforest.
E. C. He answered the question.
E.I. #4: the question was about “sustainable” logging.
E.C.: That question will be taken on notice. We have your name and we’ll get back to you on that.
The company finally came clean on an industrial accident of a few months ago, when a wood fired boiler under test exploded.
It was not a pressure vessel explosion but a firebox explosion caused by a sudden influx of wood dust, probably caused by vibration dislodging a buildup of fines from nearby mill operations. The result was extensive damage to the boiler which rumour says cost in the order of $500,000 to repair. The explosion was kept very, very quiet (pun intended) because soon after, the company’s lawyers dealing with a complaint about the boiler’s future operation by a local green group claimed not to have known of it.
E.I.#6: regarding the new boiler, we are pleased the company accepted the government’s recommendation for lower emission standards – but what we will get is still not world’s best practice. The company should be achieving even lower emissions than statuary requirements. Is it true there was an incident when the boiler was being commissioned? Is it true there were no injuries? Was the accident reported? What were the added costs?
E.C: the boiler was not installed to increase production but to speed up production. There was an accident, due to human error. It has been rebuilt and is covered by insurance. The repaired boiler has a lower level of emissions.
A number of other questions related to chemical use in plantations were parried, the typical answer being that the company operates within the law.
Of more interest, was a question from an investment advisor asking about future risk following fines being levied on the company as a result of illegal forestry practices and pending prosecution for logging without a permit :
E.I.#11: I am increasingly reviewing risk exposure of companies. Does Gunns have any program to examine and advise shareholders of any contingency risks in the future? Will you take that question on notice?
Chairman: I repeat there are no “important” risks to come in the future.
And so the meeting ended.
Definitely a whimper, compared to the potential bang when what could have been brought out about the forestry industry in Tasmania is brought out.
Maybe next year.