Signs of big year for timber

By John Wilkinson

IN what is expected to be a bumper year for timber schemes, Northern Tropical Timbers (NTT) expects to launch a new project in September after achieving its sales targets for this financial year.

The fund manager is looking to raise $10 million by June 30 and is over 50 per cent there, NTT head of sales James Banfield said.

The agribusiness sector as a whole was hoping to raise around $1 billion in 2004-05, and most observers expect that after June 30 it will have achieved this.

“This year’s mahogany project is an extension of last year’s scheme, which raised $1.7 million,” Banfield said.

“The new project has been given a recommended rating by Lonsec, which has estimated the ungeared internal rate of return to be 15.3 per cent.”

Lonsec has rated the project moderate to high risk, with the critical strengths being the taxation benefits afforded to timber schemes and the global demand for mahogany.

“There is huge demand for the wood from China, Europe and the US, but for the first three to four years we will concentrate on the Australian market,” he said.

“We see mahogany as a replacement for red cedar. Australia imports 54,000 cubic metres a year.”

NTT has planted 800 hectares of mahogany at Cooktown in Northern Queensland. The tree grows in tropical areas with between 600 to 1,800 mm of rainfall.

Investors in the scheme, who pay $6,732 for a minimum investment of two woodlots, which will have 82 trees, will get a return in year 10 when the first wood is harvested.

Meanwhile, TFS Corporation has doubled its sales prospects for the 2005 financial year.

In its listing prospectus the company forecast sales of 100 hectares of sandalwood plantations in the Ord River Irrigation Area in Western Australia.

TFS has applied to the Australian Securities and InvestmentsCommission for permission to sell a further 25 hectares to meet demand from investors.

Chief executive officer Tom Cullity said the high demand for the company’s managed investment scheme reflected the strong world demand for sandalwood and the success of the company’s 512 hectare scheme.

“We were pleased that the demand for our sandalwood project was high earlier in the year at a time that is traditionally slow,” he said. “This demand has increased significantly as the financial year has closed to the extent we have more than doubled our forecast sales and still have buyers waiting.”