climate change

Construction and building materials firm Fletcher Building forecast today that its full year profit before unusual items would be between $450 million and $460 million.  Its 2006/7 full year net profit was $484 million, up 28 percent from the previous year, and included a $70m one-off tax gain.

Speaking to the annual shareholders meeting, chairman Rod Deane said net earnings for the first four months of the June 2008 financial year were ahead of the same period a year ago.  The company was comfortable with a consensus of analysts forecasts for a net profit after tax and before unusual items for the year to June 2008 of between $450 million and $460 million, Dr Deane said.

Chief executive Jonathan Ling said market conditions were generally softer.

Dr Deane said in New Zealand, Fletcher anticipated a decline in new housing consents but also noted a backlog of housing work and unsatisfied demand for alterations and additions.  "Activity levels in commercial construction, and in infrastructure remain strong, and it is encouraging that our New Zealand construction backlog is at record levels of over $1 billion."

In Australia, residential markets vary state by state, while non-residential markets were generally flat. Infrastructure markets were expected to remain relatively steady with public infrastructure investment being a key driver.  The European and Asian markets served by Fletcher's recently acquired Formica for $1 billion were in good health, but the well-publicised weakness in the US continues, Dr Deane said.  "Notwithstanding that the rationalisation is taking longer than expected, we are comfortable that the benefits will be realised. Overall we remain pleased with the (Formica) acquisition," he said.

Mr Ling said the high New Zealand dollar had had an adverse effect on earnings – specifically in some of its building products and steel businesses, where it made exporting more difficult.  "The fact that the group performed so well despite the operating environment again bears out our focus on earnings reliability.  "Operating in different regions and across market sectors, our peaks have more than compensated for our troughs."

Mr Ling said Formica's Asian business had performed strongly, since Fletcher took over in July. The European business also performed strongly while the North American business had deteriorated. It was midway through a manufacturing restructure in a tightening market.

Fletcher had closed a Californian factory and doubled production at the Ohio factory but the project was taking longer than expected.  "However, overall we're happy with our progress with Formica."

Mr Ling said the Government's plans to introduce an emissions trading scheme to limit greenhouse gas emissions would, if implemented as announced, affect Fletcher operations in several ways.  Its largest carbon dioxide emitters, Golden Bay Cement and Pacific Steel, would be among the companies required to buy carbon units.

All operations would face increased electricity charges.  "We are concerned that the scheme, if not implemented well, could have a significant adverse impact on the competitiveness of New Zealand manufacturing.  However, there are ways to avoid this and we hope that the Government will pursue them."

Fletcher shares were up 7 cents to $11.25. They have risen from $10.95 at the start of the year but are down from a peak of $13.42 on May 24.

MELBOURNE - Countries that refused to confront climate change and environmental sustainability could face trade barriers on global markets, Prime Minister Helen Clark told business leaders in Melbourne yesterday. Speaking in a country that has refused to ratify the Kyoto protocols on climate change and in which the environment is emerging as a critical issue in this year's federal election, she warned that governments could not afford to ignore the need for serious measures.

Early notice of potential trade action has emerged with pressure to penalise New Zealand food and wine exports for the energy required to transport produce to Northern Hemisphere markets.

"I do believe that those who do not take sustainability seriously are likely to face consumer resistance and even trade barriers in the future," Helen Clark told a Transtasman Business Circle lunch. We need to be able to confront credibly the challenge of campaigns like that around 'food miles', with its false and simplistic assumption that distance of itself implies unsustainability."

She also warned that environmental sustainability was an economic imperative of the 21st century: "There will be no prosperity without it." Her audience included executives from some of Australia's biggest corporations, now facing a growing political debate about climate change and sustainability that Prime Minister John Howard has warned will increase energy and other costs.

Canberra has declined to ratify the Kyoto protocols because of its heavy dependence on coal-fired energy and the potential impact that present targets for emissions of greenhouse gases could have on its economy, although Mr Howard is now looking at a carbon trading scheme. He has refused to set an emissions target until after the election. The Labor Opposition has said that if it won office it would ratify Kyoto and reduce greenhouse emissions by 60 per cent by 2050.

Although not entering the Australian debate, Helen Clark said New Zealand had realised that no one could sit out those issues and that "everybody has to get on board". "If you've ratified Kyoto, as we have, you don't have a choice," she said. If countries did not try to make a difference they risked being branded in key markets as dirty and non-caring. "Different countries will take different paths to a more sustainable economy because of different stages of development and of access to different local resources," Helen Clark said. "Naturally, Australia, with abundant coal reserves, will place more emphasis on the development of clean coal technologies than New Zealand, as hydro and geothermal power generation are more readily available options for us."

She said that sustainability was becoming part of the kiwi ethos and was being put into practice by the private sector in such initiatives as the Stock Exchange's proposed carbon trading platform, as well as the CarboNZero programme. Commercial benefits were emerging through participation in a credible programme to achieve carbon neutrality, illustrated by increased demand for New Zealand Wine Company products. And facing potential trade problems such as the "wine miles" debate, Helen Clark said New Zealand and Australia had a common interest in working to steer the debate into a more rational direction.

"We must work together to share ideas on tackling global warming," she said. There were opportunities to build partnerships.

New Zealand business thinks it needs a change of government to unleash its potential. But all it needs is to change its own culture. The dysfunction starts right in the boardroom and seeps out from there.

That's the harsh but crucial truth demonstrated in spades in the latest New Zealand Herald Mood of the Boardroom annual survey. Once again, it showed what a miserable bunch of unambitious deniers run many of the country's businesses. They were very quick to blame everybody else, particularly the government, for their difficulties. They trotted out the usual long list of complaints about tax, regulation, labour shortages, exchange rate and policies. The poll results showed they were certain the government would lose the next election; and they believed they would then be better off under National.

But this view of the world is more an indictment of businesses than government. The business respondents were remarkably illogical, ill-informed and inconsistent in many of their opinions. Yes, for example, there are labour shortages. But, by and large, the solution lies with the companies themselves.   The best, most profitable companies will attract the staff they need because they can offer them interesting work, career progress and good pay. Refreshingly, the survey quoted chief executives of two such companies.

Of course, governments play vital roles in getting education, skills training, welfare, tax and immigration policies right to maximise the number and quality of people in the workforce.  But if business thinks New Zealand is seriously off the rails on any of those issues, it should lift its gaze from its navel to the wider world. You can find many nations where businesses do better with worse governments. That said, there's always room for improvements. But those take time and even then the success of policies depends on how businesses then use the national workforce.

So it is down to business. If New Zealand is to prosper, businesses have to make the shift from being labour intensive to capital intensive. That is the only way they will improve their technology, sophistication of their products and the wages they can afford to pay. That's the nub of the productivity debate. That's why the Budget cut the corporate tax rate to 30% and offered a raft of other incentives to those companies that have a bit of ambition and plan to invest in their future and the country's.

Superannuation was another crashing, ill-formed and self-serving contradiction revealed in the Mood of the Boardroom survey. On one hand, 82% of respondents supported compulsory superannuation. But on the other hand, they see it as somebody else's problem. Asked before the Budget, only 50% of large companies and 15% of small and medium companies said they would contribute to a super plan.   Who do they think is going to pay for super? Don't they know that Australian employers pay 9% of their wage bills into employees' compulsory super plans? Don't they know that's the main reason why Australia has $A1000 ($NZ1122) billion of pension assets so it can afford to buy up lots of companies here?

It is just as well the government used the Budget to spring compulsory KiwiSaver contributions on employers. Given businesses' desire to push the bill on to somebody else, the talks would have ground on for years, even as the country's hopeless dis-savings record (that is, the rapid accumulation of household debt) went from chronic to catastrophic.

Tax cuts were another topic surveyed. Business strongly supports personal tax cuts. At first glance, it seems so noble to put their staff first. The truth, though, is that quite a few employers hope that they could skip a wage rise or two if taxes were cut. And again the illogicality, the sheer ignorance, is a worry. Don't businesses understand personal tax cuts will increase pressure on spending, house prices, imports, interest rates, the dollar and the current account deficit?   So, they argue, government should cut spending instead to relieve the pressure. OK, so what will they give up from the long list that runs from roads, apprentices and research to universities, export services and lots of other essential investments in economic capability and growth?

Amazingly, National is just as irresponsible. The day after the Budget it voted against cutting the corporate tax rate. The vote was on that alone, not the whole Budget. Asked to explain the party's curious decision, John Key said National's top priority was personal not business tax cuts. And this is the party that business thinks will deliver what it needs to unleash its potential?

What business really needs is a hefty slug of reality and responsibility. Not much was evident in the survey. The views were particularly parochial. Apart from a few references to falling behind Australia and oil prices being their greatest international worry, there was scant evidence the chief executives had much knowledge or interest in what was going on out in the world.

Their views on climate change were particularly revealing. To the question, "Are you sufficiently convinced the science of climate change is accurate and robust?", 72% answered "no" or "unsure".  They would have answered "yes" if they had taken even passing interest in the latest, well-publicised reports from the UN's Intergovernmental Panel on Climate Change. "Warming of the climate system is unequivocal," it said. "Most of the observed increase in globally averaged temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations." By the way, "very likely" has a precise scientific definition of 90% likelihood and anthropogenic means human activity is the cause.  This large majority of climate deniers prove to be equally muddled on related issues. Although they don't believe the science, 82% believe that New Zealand should prepare for a carbon-constrained future anyway. In addition, 64% don't believe or are unsure that the country has enough electricity to fuel business growth. But 93% don't believe power prices should be increased. That's nonsense. There's no way we can increase electricity capacity, either in non-carbon ways like wind or carbon ways like coal, without putting up the price.

Quite simply, business wants lots of things gifted to them - a break on climate policies, more infrastructure, employee tax cuts, superannuation, roads and electricity to name but a few. It is not prepared to pay for them. For example, 52% of respondents want the government to invest in broadband but then they reject by strong majorities the three ways it could happen.  In stark contrast, what would a constructive corporate culture look like? Business leaders would be ambitious, confident about themselves and the country, excited about New Zealand's opportunities in the world, ready to shoulder a fair share of the responsibility and investment; be strategic, well-researched and deeply analytical.

There are some. The search is on for more. Nominations, please, to oram@clear. net.nz

Most New Zealand exporters should not suffer from a move by Britain's largest supermarket chain to label goods imported by air, Trade Minister Phil Goff says.

Supermarket chain Tesco this month unveiled a £ 500 million ($NZ1439 million) strategy to cut carbon emissions and persuade its customers to buy environmentally friendly products.

Tesco said it planned to label food with details of its carbon footprint, showing consumers the amount of carbon emitted during the production, transport and consumption of each of the 70,000 different products it sells.

However it acknowledeged that would be complex and could take several years to implement.

As an initial step it would put airplane symbols on all goods imported by air. Air travel is one of the most carbon intensive forms of transport.

Mr Goff today said the move should have little negative effect on New Zealand exporters as most sold food and drinks – 99.75 per cent of which were shipped overseas.

New Zealand was against the concept of food miles which only took into account the transportation of a product rather than its production.

However, the final Tesco plan, which incorporated both, should benefit New Zealand products, once it was fully implemented.

"We welcome that, provided its done in a full and appropriate manner," he told NZPA.

"New Zealand has got a good track record in that regard, therefore an objective use of food labelling would largely be to our benefit rather than our detriment."

Lincoln University studies had shown lamb produced in New Zealand and shipped to Britain used about a quarter of the energy the British used to produce and freight its own lamb to local supermarkets.

New Zealand dairy products used about half the energy of British counterparts, while onions and apples also used less even when transport halfway around the world was taken into account.

The Ministry of Foreign Affairs and Trade (MFAT) was monitoring any reports on the issue and had set up a group comprising representatives from 25 industries to respond to any incorrect information.

Mr Goff said the Government was continuing to raise the issue with its European counterparts.

Tesco is the undisputed British market leader with around 30 percent of the country's grocery market.

Its new new green plans also include limiting the amount of produce freighted by air to 1 percent from the current 3 per cent and cutting emissions from existing stores worldwide by at least 50 per cent by 2020.

Tesco said that its current direct carbon footprint in Britain was about 2 million tons of carbon dioxide a year, with mass refrigeration of produce accounting for roughly a third of emissions.

The grocer also intends to reward shoppers who buy organic, Fairtrade and biodegradable goods with green loyalty points.