This was published 13 years ago
Nimble greens outgunned Gunns
Peace in the forests is a priority for the new boss of the logger and woodchipper, writes Andrew Darby in Hobart.
WHEN forest activists swarmed over a Gunns woodchip mill in Tasmania, shutting it for much of a working day, the company's response was to sue. The activists were arrested by police and dealt with by courts, but that wasn't enough for Gunns in 2008.
The Triabunna 13 case was born - with a twist, because the plucky protesters launched a countersuit, alleging false and misleading claims over Gunns' pulp mill project.
This week a roadmap was laid out by industry and green groups in Tasmania to end any need for such skirmishes. Instead of lawyers at 20 paces, Gunns wants peace with the Triabunna 13.
''We'd like to get a resolution of this,'' chief executive Greg L'Estrange said of the case. ''And we're hopeful of achieving it. We recognise people should have the right to protest. But there is the issue of putting people in danger. There should be principles of how you resolve this more proactively.''
This is the language of a bridge-builder, and it's still a new thing for Tasmanians used to the old Gunns.
It's less than six months since institutional investors shook loose the company's entrenched former executive chairman, John Gay, and L'Estrange was given his head.
Since then he has kept up a fast-paced company restructure, rocked the national forest industry with a landmark speech, and set up a mountain of work in translating the forests peace pact into reality.
The company's share price has risen from 26¢ in May, to an eight-month high of 78¢ - up 22 per cent in a day after the pact was unveiled on Tuesday.
L'Estrange stands to be rewarded for his work with seven-figure bonuses.
But Gunns' reorientation has cost it an alliance with the rest of the Tasmanian forest industry and offers uncertainty to dependent small timber communities. The company is also yet to achieve financial backing for a pulp mill project weighing increasingly on its books.
The restructure began under Gay as cash from export woodchip sales by the country's biggest chipper dried up. Gunns set about cutting debt and refocusing on the timber business. In the past 12 months it has sold hardware stores, wine assets, private native forests, and is moving to shut down sawmills in Western Australia and Tasmania.
At the same time it is picking up the pieces of other failed timber managed investment schemes, and softwood milling. But the most fundamental shift came after Gay's departure in May, which coincided with the beginning of the closed-door peace talks.
L'Estrange demurred at a suggestion that he had convened these roundtable talks involving industry, union and green groups. But he said Gunns had sat at the table through the whole process.
Gunns' main Japanese customers were already demanding plantation-sourced pulp, and potential investors in the $2.2 billion mill wanted the same. But it was still a leap for L'Estrange to call the war over the forests lost by the industry, which he did in a speech in Melbourne last month.
''In this area I believe that the industry has been out-thought and outplayed,'' he said, announcing that the company would move out of native forest logging altogether.
Gunns is the major customer for wood from about 600,000 hectares of public native forest, and his announcement made it clear that work towards a peace plan had momentum.
In making this move, the company quit the Forest Industries Association of Tasmania, of which it was clearly the dominant player. Other smaller FIAT members still want some native forest logging for decades ahead, and FIAT chief executive Terry Edwards said Gunns forced every industry hand into the talks.
''We could have stood back and done nothing and just let Gunns go through with what they wanted, and let the industry fall over,'' he said. ''Or we could be involved in the process and try to negotiate an orderly and structured transition.''
Nevertheless, FIAT claims that Gunns' exit from public native forests has freed the resource for others both to protect the green groups' high conservation value trees and to keep a workable sawmilling industry.
It's unclear how soon the changes will affect other towns dependant on woodchip mills, such as Triabunna, or sawmilling towns that may follow Scottsdale, where Gunns closure announced this week will cost 120 jobs.
''There will be job losses,'' Edwards said. ''In their sawmills and in their harvesting operations and in their woodchip mills.''
L'Estrange's response was to cool down passions: ''We need to urgently work on the practical outcomes that will affect our employees - rapidly, but in the right format to get resolution.''
Which makes the $2.2 billion pulp mill project, on which Gunns has sunk substantial amounts of cash already, of even greater significance to the company - and the state. Gunns assessed the Tamar Valley mill as probably proceeding, based on achieving finance.
''If the project were not probable, this would involve the expensing of the $205 million included in capital work … through the profit and loss,'' it noted.
Much of L'Estrange's public language is aimed at calming community fears about the mill, and building the ''social licence'' investors are likely to require.
The peace pact ties green groups to supporting ''a'' pulp mill but not ''the'' mill. L'Estrange has opened the prospect of tinkering to meet community concerns such as odour, but he is adamant Gunns will not be going back to the drawing board.
Shadforths financial analyst Matthew Torenius thinks investors are happy that L'Estrange has kept ticking the boxes in exiting non-core assets, and said the prospect of government compensation was likely to be behind Tuesday's share rise. ''But Gunns is literally not out of the woods yet,'' he said. ''The next 12 to 18 months will be critical.''
L'Estrange clearly has the incentives to make the transition. In a package announced earlier this month he was given a $1 million base salary, a guaranteed ''thank you'' cheque the same size on December 31, 2011, and he is eligible for another $1 million on achieving group objectives.
''I've been in the native forest industry for a long period of time,'' he said. ''I think this is a once in a lifetime opportunity for the industry to get it right.''