Report to Shareholder,

We are pleased to report a steady profit of $3.540m for the six-month period ended December 2001 (2000: $3.532m). Given current market conditions, we hope to record a similar operating profit during the second half of the financial year. The companys wholly owned marketing subsidiary, Forestry New Zealand, incurred a small deficit of $0.067m on significantly lower third party sales volume.

We referred to the impact of the US economy on the forestry sector in our annual report and indeed the consequences have been evident over this reporting period. The NZ currency has remained at a historically low level, increasing returns in NZ dollars for exporters, and moderating much of the impact of the slowdown in the world economy. A softening of pruned log prices post September 11 has been offset to some extent by stronger demand and prices for other log grades, particularly in Asia. This has prompted a change in Evergreenís harvest focus. Evergreenís policy of ensuring harvest flexibility has enabled us to move with the market and maximise the value recovered. The year to date has been testing given the unusually wet weather with much higher than average rainfall. Production was disrupted in the second quarter impacting on this reporting period. We do expect to harvest increased volumes of unpruned stands this year to meet market demand and preserve more of our high value pruned stands. This will translate into increased physical volumes yielding a lower per unit stumpage.

Market conditions

The volume of product supplied into NZís export markets has remained high and that should be seen as positive evidence of the market acceptability of radiata in both established and emerging markets. The continuing supply of indigenous hardwoods into international markets has meant that the supply/demand tension required to deliver improved yields to plantation suppliers has been delayed. There is a market realisation that the tide is turning and the opportunities for much improved demand for NZ plantation grown product successful in supplying will undoubtedly emerge. increased volumes into The uncertainty is that Asia and the opportunities of timing. in these markets holds considerable promise. The industry has been successful in supplying increased volumes into Asia and the opportunities in these markets holds considerable promise.

OUTLOOK

The successful completion of the offer to note holders and the realisation of positive cash flows has been recognised by shareholders through an improvement in the share price.

Evergreens participation in on market purchasing under the share buy back scheme has been relatively modest with the Company as at 28 Feburary having purchased just over 22% of the shares traded since the buy back commenced.

We will continue to look at means by which we can strengthen our balance sheet and more closely align debt to forest maturity and anticipated cash flows.

While we have yet to conclude initiatives to achieve our desire to grow with the associated further benefits of scale, that objective remains in clear focus. Our efforts will continue in this respect but careful management of the resource we own will be our first priority.

International markets for NZ suppliers are expected to be stable with yields at or about current realisations over the balance of this calendar year. We remain on track to obtain Forest Stewardship Council (FSC) certification in the next financial year. In the longer term we remain confident that our ability to provide high quality, FSC certified product on a sustainable basis will yield improved returns for our shareholders.

Peter D. Wilson Chairman 28 February 2002

Mark S. Bogle Chief Executive 28 February 2002

Source: Jaakko Põyry Reports 2001. Figures include projected share of Nuhaka harvest.

Return to Annual Reports

 
Peter Wilson
Chairman

Mark Bogle
Chief Executive