TALK about a baptism of fire. Shortly after taking over the top job from founder, John Young, Great Southern managing director Cameron Rhodes faced the challenge of not only negotiating the company through tough economic times, but also steering it through a major restructure. With the weight of regulatory uncertainty surrounding non-forestry MIS and faced with increased operating costs, the restructure, which began last February, proved more difficult than the board could have envisaged And while not all outcomes went to plan, Mr Rhodes said the company did achieve overall success considering the economic climate. "We had always realised that, in starting this process, we did set the bar reasonably high. We needed 75 per cent of all investors voting to accept the proposal and that's a very high requirement. That's why we envisaged that we wouldn't get them all up, but we would get a level of acceptance," Mr Rhodes told WA Business News. "We're relatively pleased with the outcome and particularly now that process is complete we can now move on as a company and pursue our other business objectives." With greater control of existing assets, the company says it has improved certainty of its future cash flows, lowered overheads and reduced gearing, which had climbed from 59 per cent in 2007 (net debt to equity) to 99 per cent in 2008. To further reduce gearing, the company is assessing the option of selling cattle assets, including 217,000 head of cattle valued at $131.5 million, and 1.4 million hectares of land valued at $160 million. The newly acquired plantation interests are expected to deliver $125 million of net harvest proceeds over five years, with ownership of the land putting the company in a better position to capitalise on the Carbon Pollution Reduction Scheme and participation in the carbon credit market. "We've got a very strong balance sheet. Market conditions are tough and they are challenging, but were backed very solidly by good assets," Mr Rhodes said. Great Southern will offer two forestry projects and possibly an almond project in what will be a challenging year for MIS. But Mr Rhodes is confident the company can retain its market share of about 40 per cent of total sales, with major competitor Timbercorp out of the picture this year. "There's no doubt it's going to be challenging because of the economic conditions in particular. I think any investment product faces a more challenging environment this year," Mr Rhodes said. "The market will have limited product supply with other alternative investments, particularly tax effective investments, having much higher risk. ''Hopefully there are still reasonable opportunities this year, but I would expect the size of the market this year would be lower than it has been. ''One of the major players is out, and I think there are some constraints on everybody this year. The availability of finance to offer to MIS investors is more limited than in the past, and the company's own capital requirements are such that providers would be looking at how much product they want to offer.'' Mr Rhodes believes that, as the MIS sector evolves, project managers will be more strategic with their project releases. "As the market matures, people will sell product on the basis of business strategy," he said. "I think it's really a maturing of the industry in that, gone are the days where you sell however much product you can sell. ''You look at what you're strategically trying to achieve in terms of developing key regions and getting economies of scale etc and that will drive how much product is available on the market. "We're still operating, I think, in the right business sectors in terms of forestry and agriculture, that do provide some opportunities even in these challenging times."
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