Quintis to wind-up 10 sandalwood projects

Quintis Forestry's entity Sandalwood Properties Limited has moved to wind-up 10 of its financially troubled plantation investment schemes after facing challenging market conditions.

The WA-founded forest plantation manager has lodged an application with the Supreme Court of WA to wind-up 10 of its sandalwood projects located in the top end of Australia- in a move that is likely to send the group's subsidiary Quintis Leasing into administration.  

It comes after the company engaged KPMG to undertake a review which found the schemes were not financially viable and were expected to cost the investors money, rather than provide sufficient returns from a harvest’s sale. 

In a statement, SPL chairman Kent Burwash said in hindsight, too many trees were planted when the schemes were launched, outweighing global demand. 

He said two of the four recent managed investment scheme (MIS) public tenders failed to attract acceptable bids, and the wood that was sold went for below the price needed to break even. 

In the past three years sandalwood prices have collapsed more than 50 per cent, impacted by pandemic-related logistics challenges and a Chinese ban on Australian timber.

SPL estimated it would cost more than $30 million to take all the projects through to harvest, sell the wood and remediate the land.  

The entity said by winding-up the projects now, about $2.5 million of escrowed funds would be returned to project investors in the 2012-2016 schemes, which doesn’t account for five of the schemes. 

Mr Burwash said the SPL directors had no choice but to pursue the winding-up application for each of the 2007 through to 2016 projects once they were found to be unviable.

“Two of the past four recent MIS public tenders have failed to attract any acceptable bids, and the wood that did sell was still below the price required to break even,” he said 

“The size of the harvest is expected to increase materially next year, which will place further pressure on prices. 

“With the benefit of hindsight, too many trees were planted in the period when these schemes were launched as compared with the current global market demand.” 

Quintis is the largest MIS investor, owning about 10 per cent of the impacted projects and, therefore, would take the largest hit from the wind-up action.

According to the statement, Quintis will be unable to recoup more than $40 million in unpaid plantation lease and management fees from impacted investors that would have been payable if the projects ran to completion. 

As a result, its subsidiary Quintis Leasing is likely to be placed in voluntary administration “shortly”, in a move that is not expected to impact any other Quintis Group entities.