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Gunns half-year profit down by 98 per cent -

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ELEANOR HALL: Now to the plunging profits of the controversial Tasmanian timber company - Gunns.
The company today announced that its half-yearly profits have fallen by 98 per cent.

It is blaming a decline in its exports to Asian markets but is promising investors that it will
still raise the $2.5 billion it needs to build Australia's biggest pulp mill.

In Hobart, Felicity Ogilvie reports.

FELICITY OGILVIE: Gunns' exports of woodchips to Japan have collapsed, and so has the company's
profits. After-tax profits for the first half of the financial year have dropped to $400,000 -
that's down from $33.6 million the same time last year.

A financial advisor Robert Johnson has been analysing Gunns' result on ABC Local Radio in Hobart

ROBERT JOHNSON: The conditions in their key markets have been extremely tough and that has caused
revenue to fall substantially. Overall net profit for the six months to the 31st of December was
$400,000 which is a disastrous result.

FELICITY OGILVIE: The Forest Industry Association of Tasmania is disappointed but not shocked at
Gunns' massive drop in profits. The associations' chief executive, Terry Edwards, says it's a tough
time to be selling woodchips to Japan.

TERRY EDWARDS: The key issues affecting our profitability and our capacity to export into the
strong Asian markets is a recovery of those markets, particularly the Japanese market, from the
effects of the global financial crisis.

We are also still experiencing a very strong Australian dollar which does affect our profitability
and our cost competitiveness in that market but I think increasingly too, we need to address the
sabotage of our markets which is being perpetrated by a number of Green activists.

FELICITY OGILVIE: A Green activist who's against Gunns' old growth logging is Paul Oosting. He's
the Wilderness Society's anti-pulp mill campaigner

PAUL OOSTING: Well, this is a clear indication that Gunns has absolutely failed to address both the
marketplace and also the interest of the Australian community who don't want to see Tasmania's
forests being trashed.

The company has failed to address that and have been hammered by the markets internationally and
they are again failing to see that they need to completely reform their business and get out of the
destruction of our precious native forest estate.

FELICITY OGILVIE: Gunns has told the stock exchange it's planning a company restructure to help it
get the finance it needs to build a $2.5 billion pulp mill in northern Tasmania. In a statement to
shareholders, Gunns says it's negotiating with several new purely financial investors as well as a
potential joint venture partner - the Swedish company Sodra.

The financial analyst, Robert Johnson, says Gunns needs to move out of exporting woodchips to Japan
and build a pulp mill.

ROBERT JOHNSON: I think the whole key to this and the business I think is the mill, the pulp mill
because you have seen exchange rates fluctuating in a strong dollar is hurting them significantly.
You're seeing their markets drop away and the key point is that, you know, pulp as a business has
increased significantly and there is a strong outlook.

FELICITY OGILVIE: So Gunns can make money from pulp - but it needs to raise at least $2 billion
first to build the mill.

ELEANOR HALL: Felicity Ogilvie reporting from Hobart.