Elders is to cut the value of its holding in Forest Enterprises to zero after the appointment of an administration to FEA yesterday.
In a statement to the ASX Elders said the write down in the value of shareholding in FEA to zero would see an additional non-recurring charge of $5.7 million to the previously announced write down.
Elders shares were steady on $1.35 yesterday.
Elders said the move would not change underlying earnings forecast and prospectus forecast and there would be no cash impact.
"The 13.5% shareholding, had previously been written down to equity value by a $26.7 million adjustment announced to the ASX on 26 March 2010," Elders said.
"Both write-downs will be recognised as a $32.4 million non-recurring item in Elders’ accounts for the six months to 31 March 2010.
"Underlying profit forecasts, as published in the Company’s recent prospectus, are unaffected by the non-recurring charge.
"The prospectus forecast for 2010 incorporates a projected loss of approximately $1 million from its FEA shareholding.
"The administration of FEA, and the write down of the investment, hold no direct implications for Elders’ corporate strategy.
"The shareholding in FEA was acquired in 2004 by previous management of the then named Futuris at the same time as timber processing assets that were divested by Elders in December 2009.
"Elders declined to participate in FEA’s capital raising in October 2009.
"Elders Forestry is a joint shareholder with FEA in SmartFibre, a 50:50 joint venture engaged in handling and loading of export woodchip."
Elders is considering opportunities available to it under the joint venture shareholder agreement that will advance its strategic agenda.
Elders Chief Executive Malcolm Jackman said that FEA’s announcement reflected circumstances particular to FEA, and were not directly relevant to Elders Forestry.
"Elders Forestry is an entirely different proposition. Elders has completed its refinance, recapitalised our balance sheet and reduced debt.
"We have exited timber processing and have negligible grower loans on our balance sheet, with our growers overwhelmingly having been financed through external bank facilities" said Mr Jackman.
Elders is due to announce its results for the March 31 half year on May 17.
