Aug 13, 2012

Trouble at mill … is Gunns’ pulp plan dead?

Gunns has announced it no longer believes its seven-year plan for a Tasmanian pulp mill is "probable to proceed". John Lawrence, an accountant and former economist, asks what went wrong for the once-mighty forestry giant.

Gunns recently announced it no longer believed its plan for a new Tasmanian pulp mill was “probable to proceed”. After seven long years, the controversial mill now needs an Act of God to go ahead. So where did Gunns go wrong? How did the once-mighty forestry company end up in such dire straits?

No longer are there unencumbered assets of sufficient value to allow a joint venture with an enterprise value including plantations of $3 billion, to proceed with Gunns as a JV partner. Gunns’ measure of net tangible assets (NTA) is now negative.

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4 thoughts on “Trouble at mill … is Gunns’ pulp plan dead?

  1. Bo Gainsbourg

    A sorry tale of what happens when hairy chested politicians and forestry agencies collude to back a stinker of an idea rather than move to better anticipate market and public realities. You’ll still find pollies ready to sink billions into this industry around the country so that they can ‘show the Greenies’ etc what for. The thing that many pundits and government types hate to admit is that on the economic analysis side the greenies were right as far back as 1995 when they did the first all-Australian analysis of the plantation estate and the coming national and world glut of woodchips and recent industry history proves this. But since that doesn’t necessarily compute (ie greenies can’t be right on economics, even when they are). Recent work by the Australia Institute pointing out that forestry employs around 1% of Tasmanians will further shock those who haven’t been paying attention. Hardly the economic saviour of the state. Maybe they could crank that up to 1.5% by woodchipping every remaining standing bit of greenery in the state but given the figures above, not even that would help.

  2. mikeb

    Hubris killed Gunns. Hubris and greed and political sycophants.
    The greens have & will continue to get the blame but then that’s typical.
    Far easier to blame the easy target rather than look in the mirror.

  3. Microseris

    Whilst Gunns may be history, I can’t wait to see former chairman and chief fraudster John Gay convicted of insider trading, selling his shares before announcing the massive profit slump. But after presiding over conversion of something like 110,000 Ha of native forest to plantation and poisoning and burning millions of native animals, it will be a small victory.

  4. Liz45

    Great I say! Regardless of Gunn’s financial situation, the whole idea was flawed, and people power had a lot to do with the demise of this stupid, ill conceived and potentially destructive idea.

    Anyway, regardless of the reasons, I’m delighted that it’s not going ahead!

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