Rayonier Inc. is “bullish” about and “encouraged” by its New Zealand operation, which had “all the planets kind of lined up last year, and we’re seeing more of the same this year,” said CEO David Nunes.
Speaking with analysts during a financial conference call earlier this month, Nunes said Rayonier had always been “fairly bullish on New Zealand just based in part on the underlying productivity of the lands and the access to markets.” During 2016, a number of factors contributed to that bullishness.
“I think the one area that perhaps if you want to put it into the bucket of surprises was the effectiveness of the reduction in domestic harvest in China. This has been something that’s been attempted before. It’s been widely reported that there was over-harvesting for a long period of time. And so, it was really the effectiveness of that domestic harvest ban and the impact then that had on the market. And I think that catalysed the market to some degree last year,” said Nunes.
On top of that, the New Zealand market was very strong, especially the Auckland market, which Nunes said “is one of the fastest-growing markets” in the region. “And so, we’re seeing very strong domestic demand.” The New Zealand domestic market has taken market share from the export market, and Rayonier is now at about a 55% to 45% mix of domestic to export, he added.
“And then you also have a strong and growing market in India. So, you had all of those market factors that were taking place at the same time, while you also had low oil prices and an abundance of ships that kept shipping rates low. And then we had strong currency on top of it. So, you really had all the planets kind of lined up last year, and we’re seeing more of the same this year. We’ve seen some increase in shipping rates. But generally, we remain pretty bullish and pretty encouraged by what we’re seeing out of New Zealand this year.”
In New Zealand, Rayonier employs more than 90 forestry and business professionals as well as 700 contractors throughout the country, and harvests more than 2 million cubic meters of timber per year, sold into the domestic market and exported into Asia with China, Korea and India being important markets, the company’s New Zealand website states.
Matariki Forests, managed by Rayonier New Zealand, is the third largest forestry company in New Zealand, with some 130,000 hectares of plantations across the country, according to the website, and Rayonier increased its ownership of the Matariki JV in New Zealand in 2015, taking its holding to 77% from 65%.
In response to an analyst’s question during the May 4 conference call, Nunes said there were no regrets whatsoever about that decision.
The full release from Rayonier with condensed statements of consolidated income is available here.
Source: Industry Intelligence Inc