15 September, 2011

Government's VicForests logs a profit, but only just

Ben Butler
The Age, September 15, 2011

THE state government's logging company, VicForests, burnt through more than $5 million in cash last year as its customers struggled to pay their bills, accounts tabled in Parliament yesterday reveal.

Thanks to a $5.8 million grant for bushfire recovery services from the government, the native forest logging monopoly declared a profit of $2.3 million for 2010-11.

But VicForests' operating cash flow was negative for the second year running and its borrowing from government again blew out, increasing from $19 million to $25 million - a tenfold increase since 2009, when it owed Treasury just $2.3 million. A dramatic surge in overdue customer accounts, which ballooned from about $6.9 million to about $16.4 million, was due to ''the difficulties the timber industry is currently experiencing'', the company said in notes to its accounts.

''A major customer incurred substantial debts amounting to $7.3 million and up to 60 days past due, which has resulted in VicForests suspending supply,'' the company said. The customer had resumed paying in July or August, ''with the account expected to be current by the end of August''.

''Without this delay VicForests would have returned to a positive operational cash-flow position in 2011,'' the company said. It said some customers were on payment plans and one big customer had quit the business, leaving behind a ''long-outstanding debt'' that was being repaid.

VicForests also wrote off $407,000 of trade debts it no longer believes will be collected.

Chief executive David Pollard said VicForests' financial results had improved ''even though the global markets for wood fibre of all types remains problematic''.

''We are optimistic about sustained performance in the year ahead, particularly if continuing pricing problems can be resolved with key customers,'' he said.

One customer has owed VicForests $3.5 million for more than a year, but is disputing the amount, the accounts show.

He said VicForests had been ''discussing strategies to revivify the industry in Victoria'' with the Baillieu government, elected in November. ''This has included a range of related activities that affect the commerciality of VicForests and necessary changes to law and regulation.''

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