The Invercargill City Council's forestry company could return $200,000 to city coffers this year and is buying up more land in an effort to boost future dividends.
The company has just bought about 600 hectares of land at Palmerston in East Otago.
Dean Johnston, the council's director of finance and corporate services, would not disclose yesterday how much the land cost, citing commercial sensitivity.
The money to buy the land came from Invercargill City Forests and not directly from ratepayers, he said.
Invercargill City Forests Ltd director Les Pullar said draft results showed a $423,000 profit for 2011-12 and a return to Invercargill City Holdings Ltd of $200,000.
The forests were expected to generate increased dividends for the city in the next two to three years as harvesting continued, with annual returns of $300,000 t0 $400,000 likely, he said.
Figures published by the Invercargill City Council show that in the 2010-11 financial year Invercargill City Forests made an after-tax profit of $1,624,666, from which it returned $200,000 as a dividend payment to Invercargill City Holdings.
The 2010-11 result was the first time the company paid a dividend to the city as harvesting of its Dunrobin block started and it reaped benefits from selling carbon credits.
Of this 2010-11 after tax profit $248,819 came from the direct sale of timber from the assets it holds.
The majority of the profit, $1,375,847, came from the sale of carbon credits. The company also repaid debt of $1,583,500 through the year.
Mr Pullar said there would be no sale of carbon credits this year and, in fact, carbon credits were treated as a bonus rather than a regular source of income.
This year's move by the Government to allow the importation of cheap carbon credits from overseas would probably reduce the price of New Zealand carbon credits anyway, he said.
“We don't rely on the carbon credit income; we are there to grow the trees and get income from that.”
While the slowdown in the Chinese market would affect prices for timber, the log market fluctuated quite widely and this would make little difference to the operations of Invercargill City Forests, he said.
The forests amounted to 1800ha, and Invercargill City Forests hoped to increase its holdings to 3000ha within the next five years.
The forestry was located in five areas; Seaward Bush, Hedgehope, Dunrobin (out of Mossburn) Cairn Peak (near Dipton), Milton and the new land at Palmerston.
The company was looking to buy more land, which could also be in Otago.
It depended on reasonable land being available at the right price, Mr Pullar said.
Forestry at Sandy Point is operated separately by the city council's parks and reserves department.
Gordon Kilkerr is an SIT journalism student
- © Fairfax NZ News
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