The furniture manufacturing industry has reacted warily to Wesfarmers’ $29 million sale of its Sotico timber business to Tasmanian company Gunns.
“We have mixed feelings,” said Ian Hearn, director of the Furniture Industry Association of WA.
“Gunns don’t have a terribly good track record with the furniture industry.
“Sotico was operating at Australia’s best practice.
“They [Gunns] are certainly not up there like Sotico were, they have got a lot to learn.”
The State Government was far more upbeat, saying the sale would accelerate its plans for a high-value furniture industry in the South West.
“We are now looking forward to working with Gunns Limited and local furniture manufacturers to identify ways to further develop the furniture manufacturing industry in WA,” State Development Minister Clive Brown said.
The Government is hoping furniture manufacturing will be a growth industry able to generate jobs for workers displaced by cutbacks to logging in old growth forests.
Sotico is central to this strategy, since its timber allocation is about half of Western Australia’s annual harvest in native forests.
Interestingly, Gunns did not seek $8 million of State Government assistance designed primarily to facilitate development of furniture manufacturing in Manjimup.
A spokesman for Agriculture Minister Kim Chance said the assistance had been offered to three bidders, including a consortium of the State’s main furniture manufacturers.
The consortium bid $22 million for the assets, well below Gunns’ successful bid, which comprised $11 million for the business and $18 million for stock.
“The biggest chequebook won,” said Mr Hearn, who is planning to seek more information about Gunns’ plans.
“Gunns chose not to take up the [$8 million] offer because it came with conditions and the conditions favoured the furniture industry.
“How many companies are able to ignore a handout of $8 million?
“Our great concern is price; what is going to happen to the price of jarrah?”
Mr Hearn acknowledged that “Gunns are saying the right things, but time will be the test”.
Gunns executive chairman John Gay said he was not planning to restructure the Sotico business.
“We are delighted to make an investment in the jarrah business in WA and we are confident in the business’s long-term future based on the resource security provided by the State Government,” Mr Gay said.
“Our commitment is to quality production, value adding and working with the furniture industry to showcase the magnificent timber growing in WA.”
Wesfarmers noted that Sotico’s log supply contract requires a commitment to value-added production, and almost half the sawn timber output must be made available for local fine and outdoor furniture makers.
The log supply contract also provides that about half of Sotico’s 200-plus employees must be located in the Manjimup region.
Mr Chance said Gunns had agreed to the conditions in the log supply contract.
“Gunns have also indicated a willingness to have furniture manufacturers relocate to Manjimup as part of a proposed furniture precinct in the town,” he said.
The sale of Sotico’s jarrah timber business marks the final step in Wesfarmers’ exit from the hardwood timber industry.
The Sotico assets comprise jarrah sawmills at Deanmill, Yarloop and Collie, the Manjimup processing centre and a distribution centre at Welshpool.
