Clutha mayor Bryan Cadogan described Southern Cross Forest Products being placed in receivership as ''unsettling'' for the district, while a union spokesman said any job losses would be a ''massive blow''.
KordaMentha was appointed receiver of the sawmill company, with 400 employees and about $100 million in annual sales, earlier this week.
The company has four sites in Otago - Milton, Milburn, Balclutha and Mosgiel and another site in Thames.
Receiver Brendan Gibson said he hoped it would be sold as a going concern.
''The core business is profitable, but as with others in the sector, Southern Cross has suffered in a difficult industry environment... we will be looking to find new owners who can continue to build on the company's strengths.''
It expected to start that process in the next few weeks.
Mr Cadogan said his thoughts went out to the South Otago workers and their families.
''It highlights while the focus has been on Invermay there is an underlying dynamic in the lower South Island that needs to be discussed.''
He wished the receivers all the best with their job.
''Overall I believe the workforce in the Clutha District still has a robustness to it, Ready Steady Work showed me there were jobs out there.''
FIRST Union had members at the company's operations in Balclutha and Milton and general secretary Robert Reid said workers were encouraged to hear the receiver's view that the business would be sold as a going concern.
''Southern Cross is a significant employer in South Otago and Thames and the loss of jobs would be a massive blow to these regions.''
While Mr Reid could not speak specifically about Southern Cross Forest Products, one consequence of a company going into receivership was it made its suppliers nervous, he said.
''From our history of dealing with these things, there is always nervousness amongst suppliers, I know from other receiverships that is always the case.''
KordaMentha was also the receiver appointed to Tachikawa Forest Products in Rotorua and Ahead Lumber and while 120 jobs were lost at Tachikawa, they were able to sell Ahead Lumber and keep it going, Mr Reid said.
''Receivers by their very nature are hard to read, they're poker players but when they rang about this one they seemed a bit more positive than with Tachikawa.''
The receivership came on top of a prolonged period of hard times for wood processing firms, he said.
''The high NZ dollar, the high price of logs and the inadequate government procurement strategy around both the Canterbury rebuild and the government house building programmes see the continuation of raw logs being exported across our wharves while workers' job are at risk.''
The company's website said the Milburn mill ''represents NZ's most modern sawmill'' with the most technologically advanced scanning and control systems in the industry.As well as selling products domestically, Southern Cross exports logs to Australia, the United States and Asia.
- The Southland Times
Should April Miller be allowed to play in the presidents grade rugby competition?Related story: Southland woman banned from men's rugby side
Subscribe to a digital replica of The Southland Times.
Southland Times subscriber news and information.
Click here for information about advertising with The Southland Times.