Red Stag Timber

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Press Release

Embargoed to Friday 3 October 2014

 

Red Stag Timber to build Southern Hemisphere’s largest sawmill in Rotorua

Red Stag Timber Limited has announced that it will build a new $60 million world-scale sawmill on its

Waipa site at Rotorua.

 

The state-of-the-art ‘super-mill’, to be manufactured by US firm USNR, will have an annual log input

capacity of 1.2 million tonnes running on two shifts.

 

The plant will have the latest sawmilling, scanning and optimization equipment, which will tie into

the mill’s current back-end bins and stacker. It will be operational from mid-2016. The investment

will lift the company’s annual output from 450,000 m3 currently to 700,000 m3 in five years’ time

with further site investment.

 

“This is good news for Red Stag’s customers”, says Red Stag group CEO Marty Verry. “This new

sawmilling technology, along with our existing kiln drying and treatment technology, is far ahead of

anything currently used in New Zealand, and the results are straighter, dryer, stronger and more

dimensionally stable timber for our customers and their customers.”

 

“We are seeing continued opportunity to increase market share during a period of strength in the

New Zealand and Australian markets out to 2018”, says Mr Verry. “After that we expect a period of

high competition and contraction of the sawmilling sector, as Christchurch and Auckland’s

residential growth slows and the economy cycles.

 

“This will be partly offset by increasing wood penetration of the medium rise residential and

commercial markets in urban centres, where wood has cost and prefabrication advantages.”

 

The competition is also good news for home builders, with Mr Verry expecting timber prices to fall

up to 10 percent as a result of the added market competition. “We will be looking to increase Red

Stag’s share of the New Zealand structural timber market from its current 25 percent to over 40

percent in due course,” he says.

 

An estimated twenty five sawmills have closed in New Zealand in the last ten years, as larger more

efficient operations have expanded. “It’s a long term trend that we are determined to stay ahead

of,” says Mr Verry. “I think we are probably the lowest cost producer in Australasia now, but this

investment will mean another step change reduction to our cost base, mainly through scale and

getting more recovery and value from logs.

 

“This investment decision is a vote of confidence by the board in the Red Stag management team

and staff who have built up the business almost from scratch since 2003, when we purchased Red

Stag from receivership,” he adds. “They have earned the chance to make what will be a career

defining achievement.”

 

The investment also means more chip residues in the Central North Island, which Verry says can

either help underpin new investment in pulp and paper operations or potentially a new MDF plant

or the like further down the line.

 

With volatile pricing and demand in export log markets, the new investment in stable domestic

production will be welcomed by log suppliers. “We would like to acknowledge the support we have

had from Red Stag’s log suppliers. It has given us the supply confidence to make this investment,”

adds Mr Verry.

 

This capital programme is about reducing costs and gaining market share, but Mr Verry sees further

investment possible in future should the government adopt a ‘wood first’ policy for its procurement.

The Wood Processers and Manufacturer’s Association surveyed its members this year and found

that such a policy would likely trigger $1.17 billion on investment. “With the growing awareness of

wood’s environmental, thermal, and earthquake properties, as well as the potential for regional

employment and export growth, I expect the government to follow Canada, France, Japan and parts

of the USA in adopting such a policy in due course,” says Mr Verry.

 

For more information or comment:

Marty Verry

021 796455

marty@redstag.co.nz