Sumitomo Forestry's NZ unit posts record annual profit after buying Hancock forests

The timber company posted a profit of $48.9 million in the year ended Dec. 31, 2017. Photo: Getty Images

Sumitomo Forestry NZ, the local unit of the Japanese timber conglomerate, posted a record profit last year after buying the timber plantations of US forestry investor Hancock in 2016 to secure more supply for its wood processing plant.

The timber company posted a profit of $48.9 million in the year ended Dec. 31, 2017, from a loss of $18.4 million a year earlier when its earnings were hurt by a $62 million reduction in the value of its plantations, according to its latest financial accounts. Sumitomo's 2016 accounts included nine months of contribution from Hancock's Tasman Pine Forests which it bought for $369 million. Sumitomo’s NZ forests were valued at about $310 million in 2017, up from $296 million in 2016 and just $24 million in 2015, its accounts showed.

Sumitomo set up wood processor Nelson Pine Industries outside of Richmond, near Nelson, some three decades ago. The plant is one of the world’s largest single-site medium-density fibreboard (MDF) makers, most of which is exported under the GoldenEdge brand, and it also manufactures laminated veneer lumber (LVL). The company already had about 5,000 hectares of forest and the Hancock purchase gave it freehold interest in about 20,437 hectares of forest land and leasehold interest in about 155 hectares of forest land in the Nelson/Tasman region.

For Sumitomo, securing supply of wood helped shore up its existing investment in manufacturing at a time when increased demand from China has been pushing up the price of logs and prompting many forest owners to ship their raw logs to Asia's largest economy.

Globally, wood is seeing somewhat of a resurgence, and Sumitomo is jumping on the trend, announcing plans earlier this year to build the world's tallest wooden skyscraper, dubbed the W350, in Tokyo. The planned 70-storey building will be a hybrid of mostly wood and steel and will include stores, offices, hotels and private homes.

The company's New Zealand unit didn't pay a dividend to its parent this year, or last year, according to its accounts. They show the last dividend payment of $46.5 million was paid in the 2015 financial year.