Money does grow on trees

Forget the dot.com boom, take a look at where real money is being made – the tree boom.

Once consigned to the tax-dodge basket, tree growing has very much come of age in WA – with a lot more to come, including the return of the Bunning family to the public arena and a fresh push, encouraged by Resources Minister Colin Barnett, to build a paper pulp mill in the South West.

Big winners from running tree investment and management companies to date include Helen Sewell, John Young and Grey Egerton-Warburton.

They are behind Great Southern Plantations and Australian Plantation Timber with personal fortunes rocketing from nowhere to between $50 million and $100 million – each.

Not far behind, and possibly even in front, is the ITC group, once known as Integrated Tree Cropping. It is this company, with Bob Bunning as deputy chairman, which should make an entry onto the Australian Stock Exchange later this year or soon after.

Bunning, who helped direct the family firm of the same name until it was acquired by Wesfarmers, has been instrumental in turning ITC into an extremely successful business – not surprising really – the Bunning family has sap in its bloodstream.

The difference between ITC and the other players in the tree investment game is that the first movers (Timbercorp, Great Southern and APT) have been driven more by the funds management side of the business – peeling off profits from managing (tax driven) investor deposits in timberlots.

ITC made its name more as a professional forester and tree plantation manager.

It has kept a low profile but that must change because of new tax laws which mean that the company running the investment scheme needs a bigger balance sheet.

Signs that ITC is starting to talk up a bit of enthusiasm came in a recent letter to investors, pointing out a few home-grown facts about relative size.

According to ITC, it planted 10,500 hectares of trees last financial year from $25 million of investor cash – a cost per hectare of $2,380.

The ITC letter said Great Southern raised $57 million to plant 6,300/ha at a cost of $9,000. APT raised $58 million to plant 10,000/ha at a cost of $5,800 and Timbercorp raised $94 million to plant 25,000ha at a cost of $3,750/ha.

Briefcase does not want a debate on who’s got the biggest (or smallest) anything.

The provocative letter points to the robust competition developing in the tree business and to the big business growing up with the plantation timber industry – enough (possibly) to make the deepest-green environmentalist acknowledge that industry can sometimes get it right.

While the tax-dodge money flows and makes new millionaires, keep an eye on the woodchip and paper pulp debate.

Barnett recently announced the Oji Paper and Itochu plan to build a $50 million chip mill near Albany. He is also keen to resurrect plans for a $1 billion pulp mill, picking up where Wesfarmers/Bunnings failed a few years ago.