The world’s largest Indian sandalwood company will wind up the entirety of its Managed Investment Scheme (MIS) sandalwood projects in a bid to avoid further investment losses.
Key points:
Sandalwood Properties Limited has applied to wind up all of its 2007-2016 sandalwood projectsIt follows an assessment by KPMG that the schemes were not financially viableQuintis Leasing is likely going to be placed in voluntary administration
The move, which will remove nearly 30 per cent of Quintis’s tree plantations, follows an assessment by KMPG which found the schemes were not financially viable and would have cost investors more than $30 million to complete.
The assessment was commissioned by Sandalwood Properties Limited (SPL), the independent body responsible for MIS sandalwood plantations managed by Quintis Forestry.
The findings prompted SPL to lodge an application with the Supreme Court of WA to wind up their sandalwood projects planted from 2007 to 2016.
Indian Sandalwood takes 15 to 20 years before it is ready for harvest for use in a range of fragrances, cosmetics, traditional medicines, furniture and handicrafts.
Last year’s planting in Kununurra’s Ord Valley marked the first time Quintis planted new trees since it entered administration in 2018.
After recapitalising as a private company later in 2018 and achieving a record harvest in 2021, Quintis chief executive Richard Henfrey said the price of heartwood dropped by more than 50 per cent.
A projected cost of more than $30 million to complete sandalwood projects has led to the wind up decision.(Supplied: Quintis)
Mr Henfrey said the MIS plantations were most vulnerable to the price fluctuation because of their locked-in harvest dates.
“The issue with the schemes is that there’s just too much supply, the market hasn’t been able to absorb the increases in supply that we’ve had over the past couple of years,” Mr Henfry said.
“In fact, the interests of the investors will be best served by the winding up of these schemes because there will be no further costs to bear.”
Two of the past four recent MIS tenders failed to attract acceptable bids, with the wood that did sell unable to break even.
Quintis holds about 10 per cent of the investment in the schemes and stands to lose over $40 million in unpaid plantation leases, resulting in the likely placing of Quintis Leasing into voluntary administration.
“Quintis loses from this action both as an individual investor in the MIS projects and as a supplier to the schemes,” Mr Henfrey said.
Richard Henfrey says the organisation faced a tough choice in deciding to wind up the project.(Supplied: Quintis)
Mr Henfrey said Quintis didn’t anticipate internal job losses as a result of the announcement.
“We use third party contractors for the majority of the operational activity, so we have some negotiations to be done with those guys,” he said.
“But we still have a significant plantation estate [owned by Quintis] that needs to be managed, so we’re not seeing any significant reduction in staff.”
Moving forward, Mr Henfrey hoped Quintis’s ability to be flexible with its plantations would allow it to weather the market storm.
“With the remainder of the estate we expect to be a little bit more flexible, so we’ll be able to match better supply and demand,” he said.
“If demand is weak and prices are weak, we will have the option to delay harvest on some of our produce to try and manage that a little bit better.”
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Posted 3h ago3 hours agoTue 19 Dec 2023 at 7:28am, updated 2h ago2 hours agoTue 19 Dec 2023 at 8:40am
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