Carter Holt Harvey Ltd.

640 Great S Road, Manukau City
Auckland 1020
New Zealand
Telephone: ( +64) 9 262 6000
Fax: ( +64) 9 262 6099
Web site: http://www.chh.com

Public Company
Incorporated: 1971 as Carter Holt Holdings
Employees: 10,500
Sales: NZD 3.52 billion ($2.53 billion) (2004)
Stock Exchanges: New Zealand Australia
Ticker Symbol: CHH
NAIC: 113110 Timber Tract Operations; 113210 Forest Nurseries and Gathering of Forest Products; 321113 Sawmills; 321211 Hardwood Veneer and Plywood Manufacturing; 321212 Softwood Veneer and Plywood Manufacturing

A leading producer of wood fiber and forestry-based products in New Zealand and Australia, Carter Holt Harvey Ltd. (CHH) is also one of New Zealand's largest corporations. Since 2004, CHH has also begun an effort to expand into the Asia forestry products market, starting with the launch of operations in China. A vertically integrated company, CHH has one of the largest forestry and cutting rights holdings in New Zealand, with some 330,000 hectares under its control. The group operates sawmills, five pulp and paper mills, nearly 70 lumber and wood product manufacturing and distribution facilities, 25 packaging and conversion plants, as well as distribution subsidiaries. CHH has also been developing a number of new businesses, including an IT subsidiary, Oxygen Business Solutions. In the early 2000s, CHH restructured its various holdings into 17 independently operating companies, each with its own CEO. Listed on the New Zealand and Australian Stock Exchanges, CHH's main shareholder is the United States' International Paper, which holds 51 percent of the company's stock. The group's other major shareholder is New Zealand Central Securities Depository Limited, which holds 37 percent of CHH's shares.

Merging Wood Businesses in the 1970s

Carter Holt Harvey, as its name indicates, represented the merger of three prominent New Zealand businesses, each of which had begun operation by the turn of the 20th century. Carter and Holt became leaders in the country's forestry products sector, while Harvey emerged as the country's major packaging company. The development toward the future CHH began in 1971 with the merger of Carter and Holt.

The earliest component of the later CHH was founded by Robert Holt in Napier, who built his first sawmill in 1859. By 1880, Holt had expanded, building a second, steam-powered mill in Port Ahuriri. At the turn of the 20th century, Holt was joined by sons John, James, and Robert, and the company changed its name to Robert Holt & Sons. The firm then expanded by opening a mill in Hastings.

The younger generation showed some flare for innovation and adaptability. In 1920, for example, the Holt company became the first in New Zealand to begin moving logs by truck. The company also fought its way back from a number of setbacks, including fires at its mills in 1922 and 1928 and an earthquake that hit Napier in 1931. The effort to rebuild the town led Holt into lumber products. Later, the demand for lumber during World War II led Holt to become the first in New Zealand to experiment with drying kilns in order to produce seasoned lumber in less time and larger quantities. Holt also began using chemical preservatives, a first in the New Zealand forestry industry.

New Zealand's vast forests encouraged others to enter the lumber business in the late 19th and early 20th centuries. Francis J. Carter had built his first small sawmill in Kaputuroa, near the town of Levin, cutting the white pine found in the forests there. Carter later added another sawmill at Rangataua, close to Waiouru, where he was joined by son Alwyn in the 1920s. The business significantly expanded over the following decades, and by the late 1940s it had developed a network of seven associated companies. Part of Carter's growth came from its decision to expand from its base of lumber into the production of wood products. Carter also began distributing wood products through its own retail network during this time.

In 1948, Alwyn Carter took over as managing director of the company from his father, who died the following year at the age of 79. Two years later, in 1951, Alwyn Carter led a restructuring of the family's holdings, merging the various companies into the single entity of Carter Consolidated.

The Holt company went public in 1961 as Harold Holt, grandson of the founder, led the company into a new direction. After working in the forest industries in Canada and the United States, he returned to New Zealand with the idea of shifting the company away from its dependence on New Zealand's dwindling natural forests. Instead, Holt encouraged the company to invest in renewable, planted forests. The Holt company began planting exotic hardwood forests while at the same time building a portfolio of cutting rights in such important New Zealand forestry sectors as Hawkes Bay and Lake Waikaremoana.

By early 1960s, New Zealand's timber supply was already running out. Indeed, the dwindling reserves of the North Island led Carter to construct a mill in Jackson Bay on the South Island in the early 1960s. In 1969, Carter touched off considerable controversy when it teamed up with two Japanese companies, Oji Paper and Sanyo Kokusaku, to tender a bid to exploit a concession in the Southern Kaingaroa Forest. The partnership, which called for development of production lines for groundwood pulp and the building of a NZD12.3 million sawmill in Whirinaki, won the bid and construction on the site began in 1971. Under terms of the agreement, Carter's partners consented to purchase all of the mill's production for a 20-year period. Production at the site began in 1973.

Diversified Corporate Powerhouse in the 1980s

By then, however, Carter and Holt had agreed to merge, forming one of New Zealand's top forestry products groups in 1971. The newly enlarged company took on the name of Carter Holt. Into the 1970s, the company faced increasing pressure from conservationist groups, which were alarmed at the country's rapidly diminishing forests. By the late 1970s, the New Zealand government had begun to place severe restrictions on the remaining native timber supply. In the West Coast, in particular, the country's Forest Service announced that it was banning the cutting of native timber starting in 1978. Because of this, Carter Holt was forced to shut down its Jackson Bay mill.

Instead, the company ramped up production at the Kaingaroa site, boosting production to 200,000 tons per year by 1982. That mill also added production of sawn timber, which topped 100,000 cubic meters per year in the early 1980s.

Carter Holt faced pressure of a different sort at the beginning of the 1980s. In 1980, the company faced a hostile takeover attempt from larger rival Fletcher Group. Despite it smaller size, Carter Holt managed to fight off the attempt after a protracted legal battle.

The takeover attempt prompted Carter Holt to seek to gain scale in order to reduce its vulnerability to future unwanted takeover attempts. The opportunity for growth came in 1985, when the New Zealand government brokered a merger between Carter Holt and Alex Harvey Industries, a company that was also under threat of a takeover attempt.

Alexander Harvey came to Auckland in 1886, establishing a company producing machinery and equipment for New Zealand's fast-growing dairy industry. Harvey was joined by sons Alexander, David, and William, and in 1911 the company changed its name to Alex Harvey & Sons. Following World War I, the Harvey company added tin printing capacity and developed a new business in packaging. In 1918, the company opened its first packaging subsidiary in Wellington, where it produced tin containers. This activity led the company into other areas, such as the production of cabinets for washing machines and refrigerators.

Harvey grew rapidly throughout the 1930s and into the late 1940s. In 1948, in order to step up its expansion, Alex Harvey & Sons went public on the New Zealand Stock Exchange. Throughout the 1960s and into the 1970s, Harvey developed into one of New Zealand's largest manufacturers, with diversified packaging capacity in tin, sheet metal, aluminum, and plastics.

In 1984, the New Zealand branch of Australian Consolidated Industries (ACI) proffered a takeover bid to Harvey. With assistance from the New Zealand government, which sought to prevent a foreign company from gaining control of one of the country's largest corporations, Harvey and Carter Holt worked out terms for a merger, creating Carter Holt Harvey in 1985. The company then bought out ACI's stake in the former Carter Holt for NZD300 million.

Expanding International Focus in the 2000s

CHH's new scale gave it the clout to expand rapidly into the 1990s. The stock market collapse of 1987 presented the company with its first growth opportunity, when it bought up struggling Caxton, the New Zealand market leader in toilet paper, tissue paper, paper towels, and related products. CHH found its next acquisition target through Australia's Elders IXL, which had run into its own financial troubles, and in 1990 announced its intention to sell its New Zealand operations, Elders Resources-New Zealand Forest Products (NZFP). Interested only in New Zealand Forest Products itself, CHH agreed to pay as much as AUD682 million, depending on how much it was able to generate through the sell-off of Elders Resources (including mining, gas, and oil interests).

Company Perspectives:

Built on Solid Foundations: In the year 2000 Carter Holt Harvey celebrated 100 years in business. Not many companies reach the milestone of a second century, even fewer do so carrying the names of their original founders. Our company today is built on the pioneering history of our founders—Francis Carter, Robert Holt and Alexander Harvey, whose spirit, ingenuity and insight, are still looked to today, as we move forward.

The acquisition of NZFP propelled CHH into a new league, boosting its revenues by more than 60 percent to top NZD7 billion and making CHH the clear leader in the New Zealand forestry sector. Encouraged by its newfound scale, CHH next turned toward international growth, targeting the vast forests of Chile. The company began by forming a joint-venture with Chile's Angelini group to construct a medium-density fiberboard factory in Santiago. From there, CHH joined the Angelini group in the creation of the 50–50 joint venture Los Andes Investment and Development Co., formed to take a controlling stake in one of Chile's largest conglomerates, Copec. The joint venture gave CHH crucial access to Chile's large and fast-growing forestry sector.

CHH's spending spree had weighted the company with debt. The outbreak of the Persian Gulf War caused its bankers to demand repayment of more than $1.3 billion at the beginning of 1992 and another installment before the end of the year. The company stock fell, leaving it vulnerable to takeover. Indeed, Brierley Investments Limited stepped in and succeeded in acquiring a controlling stake in CHH by September 1991. At the end of that year, however, BIL had sold on part of its stake to International Paper of the United States. That company later boosted its shareholding in CHH to 51 percent. The purchase also marked the end of the founding families' involvement in the company.

Under International Paper's control, CHH turned toward the international market in the mid-1990s with the aim of developing an Australasian presence. The company made a series of acquisitions through the 1990s, including Forwood, which was held by the South Australian government, and Raleigh Paper in Melbourne. CHH also expanded its tissue business, buying up the Australian tissue wing of the United Kingdom's Bowater for AUD430 million. In 1998, CHH boosted its packaging wing as well, forming a joint venture with International Paper to acquire Continental Cup.

CHH's increasing emphasis on the Australasian market led it to exit its shareholding in Copec in 1999, selling its stake to the Angelini group for NZD2.5 billion. The sell-off enabled CHH to pay down nearly all of its debt, setting it up for further growth in the 2000s.

As part of its future strategy, CHH restructured its operations in 2001. Instead of a centralized organization, the company now broke up its operations into 31 smaller-scale businesses. These were later pared down to just 17 businesses, which were then expected to operate independently, with each company appointing its own CEO.

The early 2000s represented a difficult period for the company, as it struggled to cope with an extended economic downturn in New Zealand and elsewhere. In 2003, the company announced its intention sell off its tissue paper business, a move completed in 2004. The company also suggested that it was interested in selling off its consumer products operations and part of its forest holdings as well. Instead, CHH set its sight on expanding into the Asian market. China became the company's first target in that effort, and in June 2004 CHH announced it had reached an agreement to acquire Plantation Timber Products, a manufacturer of MDF and flooring products, for $134 million. Meanwhile, CHH continued expanding in Australia. At the beginning of 2005, the company finalized the purchase of Wadepack Ltd., a carton board packaging manufacturer with plants in Melbourne and Sydney. Such moves served to bolster the prospect that CHH would remain one of New Zealand's leading corporations into the new century.

Principal Subsidiaries

Ace Bag Company Limited; AHI Building Products; AHI Forests (Ngatihine) Limited; AHI Group Limited; AHI Nominees Limited; Carter Holt Equities (No.15) Limited; Carter Holt Forests (Ngatihine) Limited; Carter Holt Group Trustee Limited; Carter Holt Harvey Bonding Technologies Limited; Carter Holt Harvey Climate Coating Limited; Carter Holt Harvey eCargo Limited; Carter Holt Harvey Energy Limited; Carter Holt Harvey Equities (No.12) Limited; Carter Holt Harvey Equities Limited; Carter Holt Harvey Forests Limited; Carter Holt Harvey International; Carter Holt Harvey Loop 1 Limited; Carter Holt Harvey Loop Limited; Carter Holt Harvey New Ventures Limited; Carter Holt Harvey Overseas Limited; Carter Holt Harvey Packaging Pty Limited; Carter Holt Harvey Paper Co. Pty Limited; Carter Holt Harvey Roofing Inc.; Carter Holt Harvey Vortech Limited; Carter Holt Harvey Wood Products Australia Pty Limited; Carter Holt Investments Pokirikiri Farm Limited; Caxton Superannuation Fund Trustee Limited; Crimson Hill Holdings Limited; Dainton Holdings Limited; Delta Nominees Limited; Houpoto Te Pua Forest Limited; Houpoto Whituare Forest Limited; i2B2 Limited Tunapahore 4B Forest Limited; Industry Training Works Limited; Kawerau A1 Forest Limited; Kawerau A6 Forest Limited; NZ Forest Products (Australia) Pty Limited; Oxygen Business Solutions Pty Limited.

Key Dates:

1859:

Robert Holt builds his first sawmill in Napirer.

1880:

Holt opens a steam-powered mill in Port Ahuriri.

1886:

Alexander Harvey founds a machine business in Auckland.

1948:

Alex Harvey & Sons goes public on the New Zealand Stock Exchange.

1951:

Alwyn Carter merges seven family forestry and wood products businesses founded by his father Francis, forming Carter Consolidated.

1961:

Robert Holt & Sons goes public.

1971:

The merger of Carter and Holt forms Carter Holt Holdings.

1985:

Carter Holt merges with Harvey, forming Carter Holt Harvey (CHH).

1987:

CHH acquires Caxton, a leading producer of tissue papers in New Zealand.

1989:

CHH acquires a 50 percent stake in Chile's Codec.

1990:

The company acquires New Zealand Forest Products and becomes the largest forestry products group in New Zealand.

1991:

International Paper acquires a stake in CHH.

1998:

CHH acquires Continental Cup in Australia through a joint venture with International Paper.

1999:

CHH begins its exit from Chile to focus on expansion in Australasia.

2001:

CHH restructures, creating a network of independent businesses.

2004:

CHH acquires a timber business in China and completes its exit from Chile.

Principal Competitors

Weyerhaeuser Co.; Romsilva RA Regia Autonoma a Padurilor; Svenska Cellulosa AB; Metsaliitto Group; Mondi Ltd.; Korindo Group, PT; Mannesmann S.A.; Xstrata PLC; South African Forestry Company Ltd.; Tenon Ltd; S.C.A. Forest and Timber AB; Société d'Exploitation des Parcs à Bois du Cameroun.

Further Reading

Bayliss, Martin, and John Pearson, "CHH Rises to International Prominence," Pulp & Paper International, November 1990, p. 87.

Bromby, Robin, "Mills Down under Try to Overcome Strife," Pulp & Paper International, May 1992, p. 143.

"Carter Holt Harvey Earns NZ$ 435m for Year," Asia Africa Intelligence Wire, January 20, 2005.

"Carter Holt Harvey Running Fast Just to Stand Still," New Zealand Press Association, October 25, 2002.

"Carter Holt Harvey Sells Last Chilean Business," New Zealand Press Association, August 3, 2004.

"Carter Holt Harvey to Buy China Timber Maker," Asia Pulse, June 21, 2004.

"CHH Growth," New Zealand Forest Industries Magazine, April 2003, p. 5.

"NZ's Carter Holt Harvey Considers Selling Tissue Business," Asia Pulse, November 19, 2003.

"NZ's Carter Holt Harvey Mulls Sale of Its Forests," Asia Pulse, January 29, 2004.

"NZ Forestry Products Co. Carter Hold Harvey Back in the Black," Asia Pulse, January 20, 2005.

—M.L. Cohen