environment

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.

Decades of acrid burning odours coming out of Fletcher Building's Penrose wood plant are about to come to an end to the relief of residents in the area.  Fletcher chief executive Jonathan Ling said on Friday the hardboard and softboard plant on O'Rorke Rd would be shut after an investigation found an upgrade to control the smell would cost between $2 million and $4 million.

The closure brings to an end many years of complaints from residents in the area running from Penrose to One Tree Hill.  Auckland Regional Council's air pollution team discussed taking legal action after advice that there were sufficient grounds for prosecution.  ARC experts said the plant had major ongoing issues.

A One Tree Hill resident has disliked the smell for the 30 years she has lived in the area.  "It used to be so bad, you couldn't have your windows open," she said, although it had been less offensive lately.  Other residents said the smell was so bad it had forced them to to sell houses and move.

In 2001, Fletcher said it would control the odour by installing a bio-filter but the ARC had doubts about the efficiency of the equipment.  Mr Ling said smell was not the only issue. The Laminex plant had been losing money for the past three to four years so any upgrade was out of the question. He cited discussions with the ARC about emission controls and said investigations of how to fix problems and reduce the smell had been central to the plant's future.

The high exchange rate and the plant's non-profitability were other reasons for the decision to close the production facility.  "The odour comes when they heat up the processed wood fibre. It's a burning smell," Mr Ling said.  The plant operated five days a week on 24-hour shifts and staff had tried to control the smells by making only hard boards on day shifts.

"You get an odour when you're making hardboard because of the higher temperatures, so we've tried not to make that board on the night shift. We've tried to manage the odour situation but have had no complaints from residents.  We've been in discussions with the ARC on the odour for some time. We had agreed a plan of approach as to how we'd tackle the issues and that has led us to understand how much it would cost us to fix it."

The plant, known by long-time locals as the NZ Forest Products plant, had been operating for many decades and had employed 65 people.  Ling said the company would try to place as many people as possible within Fletcher's other business units but he expected some people would consider redundancy.

About 60 per cent of the plant's product was exported to Australia, North America and Asia where it was used in furniture and building. The softboard had been used for display noticeboards. The hardboard was used among other furniture in cabinets.  But Mr Ling said demand for the materials had dropped considerably and the hardboard had been largely replaced by other products.

BIG STINK

• Air pollution problems at a Penrose plant partly forced closure.
• 50 complaints since 1999 prompted Auckland Regional Council action.
• ARC has issued seven infringement notices in the past eight years.
• Three abatement notices were issued during that time too.
• ARC demanded Fletcher improve emission controls at the plant.
• Prosecution was an option if offensive odours did not stop.

MEMORIES OF 'ASHY' SMELL GO BACK DECADES

Ana Ofa knows all too well the smells from Fletcher Building's Penrose factory - she's lived a couple of streets away all her life.  "It smells like an incinerator, ashy," says the 27-year-old, whose memories of the odour go back to when she was aged 3.  It hasn't been as strong during the past few years and her most recent memory of a truly pungent reek was the night Princess Diana died a decade ago.

Neighbours say the aroma is hard to describe, their accounts ranging from "dry and woody" to a chemical stench.  "It used to annoy me," says Rosemary Lyon. "It was irritating on my nostrils."

For Bill Berwan, news that the factory is shutting is welcome relief.  "I'm happy," says the Rockfield Rd resident of 25 years. Mr Berwan's four children cried out about the "gas" smell when they were younger but the family would not move house.

While others try not to open windows or dry washing on the line when the smell is at its worst, Ms Ofa "got over it" years ago. She said the factory had an upside for the suburb, providing jobs for many residents.  Her grandfather worked there, as did several other family members.  But the last, her cousin Casa Hala, was made redundant this year after more than a decade with the company.

The run of bad luck at a new Pak'nSave supermarket in Auckland has
worsened as a fire station abandons plans to shift to the site and
contamination issues are discovered. The New Zealand Fire Service
has scrapped plans to shift its Takapuna base to an area of the site
alongside the new supermarket, which has stood empty for two years
because planning consents were found to be invalid. The Fire Service wanted to develop a new two-unit station beside the controversial and still-unopened store on Wairau Rd.

The service had struck a deal to buy part of the site based on an
arrangement that supermarket giant Foodstuffs would secure valid
planning consents. The service regarded the site as the best location
for its regional North Shore base. But two years of delays have now forced the service to drop its plans and look elsewhere.

In another blow, a small area of subsurface ground contamination from
drycleaning fluids and printing inks has been discovered on the site. During construction, Foodstuffs found the noxious substances,
thought to have come from run-off of neighbouring businesses which have
now departed.

The latest developments add to Foodstuffs' problems
with its Wairau supermarket, dogged by an 18-year battle to begin
building, then hit by a fire caused during construction, and subject to
a legal dispute with rival Progressive, owned by Woolworths Australia.

Kevin Stacey, the Fire Service's national manager of strategic assets, said a
search was now on for other sites in the Takapuna area. "I guess we're disappointed in terms of the time it has taken." Murray
Jordan, general manager of property development at Foodstuffs, said
delays had deterred the Fire Service, which had now scrapped its plans
to shift to the site at Wairau and Porana Rds. "Due to the continued delays, the Fire Service has decided not to
proceed with its plans to relocate the Takapuna Fire Station to the
site, but will pursue other options for relocation," Jordan said.

Foodstuffs has battled for 20 years to open the new store, which has been built by Fletcher Construction.

Foodstuffs subsidiary the National Trading Company got resource consent for the
store and a two-appliance Takapuna station and North Shore Fire
District headquarters on the corner site But Progressive took
the case to the High Court, asserting North Shore City was wrong to
grant Foodstuffs a non-notified consent. The High Court ruled the
consent was invalid. Foodstuffs was about to take the case to the Court of Appeal last year but then abandoned that plan.

In December, the council decided to process a new resource consent
application on a limited notification basis which meant only the
immediate neighbours would have a chance to object, and Progressive
would be locked out of the process.

Foodstuffs has applied to the North Shore and Auckland Regional Councils for new consents.

Supermarket sorrows

Pak'nSave at Wairau Rd has been dogged by a series of misfortunes:

• An 18-year battle to begin building on the site.
• Fire engulfing the building as it was being finished.
• A legal wrangle which has kept the store shut.
• Abandonment by the Fire Service, which jettisoned its plans.
• Contamination of the site, discovered during construction.

Freight rates will rise about 1.4 per cent because of the regional fuel tax proposed in the Budget, the Road Transport Forum estimates.  The increase is on top of the 11 per cent to 18 per cent increase in heavy-vehicle road user charges from April 1 which has already begun to force freight costs up.

"This is a 1.4 per cent tax on freight to fund passenger transport in Auckland," said chief executive Tony Friedlander. He said the tax was "lunacy".

Because so many imports and exports went through Auckland, people well outside Auckland would end up paying for passenger transport they would never use.

Farmers and the freight industry have come out swinging following the government's decision to allow regional fuel taxes of up to 10 cents per litre in Auckland and Wellington.

The fuel taxes, unveiled at last week's Budget, are intended to provide additional funds to build roads and improve public transport. In Auckland, this will include the electrification of the city's rail network - estimated to cost over $1 billion.

The Road Transport Forum, which represents the freight industry, says it should not have to subsidise public transport, because it does not use it.

Chief executive, Tony Friedlander, says a diesel tax of 10 cents per litre will increase freight rates by 1.4 per cent on average.

Federated Farmers vice president Don Nicolson is also joining the attack, saying it is totally inappropriate for farmers to subsidise public transport. He says it is a service the vast majority of rural people never use or derive any benefit from and a lot of diesel is used off-road for agricultural machinery. "While refunds will be available the refund process will be onerous and yet another compliance cost," Mr Nicolson says.

Mr Nicolson says that the fuel tax question is likely to affect the entire country. "Not only is it likely that other regions will implement the tax, but in the 1990s fuel companies averaged the short-lived regional petrol tax meaning that everybody paid. "There is nothing stopping a repeat this time around," Mr Nicolson says.

But the government argues a tax at the 5-10 cent level will be significant enough for petrol companies to implement regionally, rather than spreading a lower 1-2 cent tax across regions as companies did under the previous regime.

However, the fuel tax does have some supporters. The Auckland Chamber of Commerce says trucking will be more efficient once the tax is imposed because fewer cars will be clogging the roads.

It says the freight industry needs to accept fuel taxes as part of the cost of doing business. Nevertheless, chief executive Michael Barnett acknowledges that businesses will need to pass on some costs to consumers in order to remain competitive.

Customers buying three items or less from Foodtown, Woolworths and Countdown stores will be asked in future if they really need a plastic bag for their purchases.

Progressive Enterprises, operator of the supermarkets, plans to save 400,000 bags a week throughout its 156 stores New Zealand-wide.  However, Progressive's general manager of merchandise, Mark Brosnan, said if customers want a plastic bag, they will be given one.

"At the checkouts, we are taking a commonsense approach. If customers are buying items where a bag is needed, for example ice-cream, meat and a lettuce, a bag will be provided automatically.

"There is some staff training involved and there will be information for shoppers at the point of purchase. However, we expect the programme to quickly gain pace as people become aware of it," Mr Brosnan said.  Customers can also bring their own reusable 'eco bags' to pack their purchases into.

Progessive is part of the New Zealand Packaging Accord, a joint project between government and industry which aims to reduce the amount of packaging, including plastic bags going into landfills.  It was estimated this packaging made up 12 per cent of the total volume of landfills.

As part of the accord Progressive pledged to reduce the number of plastic bags it issued by 20 per cent by August 2008. In the last 12 months it had reduced the number by seven per cent.

Earlier this year the hardware chain Bunnings introduced a 10c charge for plastic bags as a first step to in getting rid of the bags altogether.

The company was donating all of the proceeds to Keep New Zealand Beautiful.  The company hoped to phase out plastic bags completely by the end of the year.

It is not usual for me to agree with Indonesian Government representatives, but Minister for the Environment Rachmat Witoelar has my full support for his call on the international community to help curb the demand for tropical hardwood.

Witoelar wants to preserve what remains of the tropical old-growth forests in Papua but he is up against out-of-control illegal logging which is fuelled by high demand for kwila in prosperous Western societies.

Witoelar conceded in a Radio New Zealand interview that the trade in illegal timber is hard to stop given that Indonesia has so many islands and so many exits.

The problem isn't only to do with geography but with the power of the timber barons and the lack of effective regulation and enforcement of their operations.

Ironically, the problem is worse than it was under Suharto, whose regime allocated most logging concessions to key supporters and cronies.

The military and its business foundations remain heavily implicated in every aspect of the logging trade, including the suppression of any opposition in their area.

The delightful summer family barbecues most of us enjoy often take place on a deck constructed from kwila and the guests sit on kwila chairs and recliners.

Greenpeace research shows that nearly all our kwila comes from the diminishing rainforest in Papua New Guinea or West Papua. And the World Bank estimates that 80 per cent of all the timber from both countries is logged illegally.

If you check out the kwila furniture advertisements in the newspaper or on the internet you will find New Zealand retailers promoting the distinctive red-brown timber's durability and attractiveness.

What is not mentioned is that this tall tree, with its spreading canopy, is under such threat that there are proposals for it to be internationally registered as an endangered species.

Every year Indonesia loses 2.8 million hectares of forest, an area about the size of Belgium.

Now that the jungle has largely been stripped from Borneo and Sumatra, the loggers are concentrating on West Papua, which shares the world's third largest tropical rainforest with its neighbour, Papua New Guinea. Only the Amazon and the Congo have larger tracts.

The region's biodiversity holds scientists in awe. Exquisitely beautiful birds, animals and plants new to science have just been discovered in a part of West Papua that the scientists dub the Lost Land.

Tragically, this pristine enclave may be lost for all time if the logging continues.

The Indonesian Government reacted promptly two years ago when environmental groups exposed illegal shipments to China of stolen logs - a huge 300,000 cubic metres a month.

Logs were seized and 170 people, including security officers and Government officials, were arrested.

But once that enforcement operation was over the timber barons and their military backers were back in business, this time sending processed wood, instead of logs, to Java, Vietnam and Malaysia from where it is re-exported to luxury markets in North America, Europe and New Zealand.

When we approached Auckland retailers, some cited documents to establish that their furniture was from correctly managed forests - or even certified by the Forest Stewardship Council.

Others seemed unconcerned about the origins of their tropical-wood products. Indonesian firm Warwick Teak, which sources its kwila from West Papua, proudly announces on its webpage that its kwila outdoor furniture is being exported to New Zealand.

I am sceptical of certification that guarantees that the timber has been sustainably logged. For one thing, kwila - like New Zealand hardwoods - does not regenerate easily and takes about 80 years to grow to maturity.

There is evidence that some kwila is smuggled out of West Papua on ships which subsequently call at Papua New Guinea, where additional logs are loaded and PNG documents supplied to obscure the origin of the cargo.

The loggers take few precautions to protect water sources or to lessen the destruction caused by their access roads, while the indigenous people are alienated from their ancestral lands for payment that amounts to a fraction of the money the timber earns in the West.

For tribal people, the logging boom is just the latest threat to their foodbasket and customary rights.

Since Freeport McMoran was granted concessions in 1967 to mine copper and gold at Timika in the highlands, it has destroyed forests and aquatic resources belonging to the Amungme and Kamoro people.

Their sacred mountain has been decapitated and a 230 square kilometre barren wasteland now dominates as the mine tailings extend relentlessly.

Greenpeace says that kwila costs the earth but few New Zealand buyers are aware that their affordable outdoor furniture has a black history.

The New Zealand Government announced late last year a policy aimed to discourage the import of illegal timber and to forbid Government departments from using it.

But this weak policy is manifestly ineffective in curbing the demand for kwila products. What is to stop the Government from regulating to prevent the import of stolen rainforest timber?

We should revive the adage of the anti-nuclear campaigners - if in doubt keep it out - and use only plantation-harvested wood for our decks and leisure furniture.

* Maire Leadbeater is a member of the Indonesia Human Rights Committee.

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.