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Differing plans for Sotico sale

FURNITURE manufacturers and the Western Australian Government have outlined radically different visions for the future of the timber industry, as haggling over Sotico’s native timber assets continues.

Furniture manufacturers want the State Government to quarantine an $8 million assistance package to Western Australian bidders for Sotico’s business.

“Its absolutely vital for the furniture industry that control of those operations be retained by a Western Australian company,” Furniture Industry Association of WA director Ian Hearn said.

By contrast, the Government has floated the possibility of Sotico’s assets being split between two buyers.

Agriculture Minister Kim Chance said Sotico’s three sawmills and its processing centre at Manjimup could end up in separate hands.

“That is entirely possible and in a number of ways a desirable outcome,” Mr Chance told WA Business News.

His comments follow Sotico’s recent announcement that its sale negotiations had collapsed.

It had been negotiating with a consortium comprising Sotico management and WA’s three major outdoor furniture makers, Jensen Jarrah, Clarecraft and Inglewood Products.

Consortium chairman Ed Valom said 14 smaller furniture manufacturers had signed expressions of interest to join the consortium if a sale was negotiated.

Sotico managing director Ron Adams said its assets were now being offered for sale on the open market.

“There have been a number of expressions of interest from forest products companies in WA and other parts of Australia,” he said.

Sotico’s operations are pivotal to the Government’s vision for Manjimup to be a centre of value-added timber processing and furniture manufacturing.

The company has been awarded contracts to process 70,000 cubic metres of native forest timber – more than half the annual harvest for the entire State.

To facilitate new investment in processing the Government offered up to $8 million of assistance to the purchaser of Sotico, a subsidiary of Wesfarmers.

Mr Chance insisted this offer came with strings attached.

“The quantum and terms of that offer is highly dependent on what the buyer puts on the table,” he said.

He said it was possible an interstate miller could buy the Deanmill, Yarloop and Collie mills but expected the Manjimup processing centre would stay in local control.

“I think the MPC operator will already be substantially involved in the WA timber industry.”

Mr Chance said if the milling and processing operations ended up in separate hands, the owners would need a “cascading set of obligations” to ensure the timber could be used by local manufacturers.

He said another possibility was a new owner would focus on ‘pre-manufactured’ components for furniture makers.

Mr Hearn remains wary of interstate buyers, who he suspects will not fully support local manufacturers.

“Its one thing to say you will do it and another to enter into the spirit of it,” he said.

Mr Hearn cited current trends in Victoria, where sawmillers increasingly were exporting timber to China rather than supplying to local manufacturers.

Given the reduced hardwood timber harvest planned for WA an added concern is that exports of timber, or its redirection to alternative uses, could leave local furniture manufacturers struggling to obtain sufficient supplies.

Mr Valom said the syndicate remained intact and would be ready to act if an alternative buyer did not emerge.

He said the worst outcome would be a buyer paying too much, getting into financial strife and adversely affecting both Manjimup and the furniture industry.

 

“The quantum and terms of that offer is highly dependent on what the buyer puts on the table.”

-         Kim Chance

 

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