NORANDA FOREST SEES STRONG PROFIT, CHAIRMAN
Noranda Forest Inc, a new company
controlled by Noranda Inc <NOR.TO>, will have net earnings of
more than 165 mln dlrs in 1987 and profit will likely continue
to grow, Noranda Forest chairman Adam Zimmerman told Reuters in
an interview.
    "I think our earnings have not peaked," Zimmerman said of
Noranda Forest, which will be Canada's largest forest products
company. Noranda previously said it is spinning off its vast
forest product holdings into the new company and is now making
an initial public offering of Noranda Forest shares.
   
    Zimmerman told Reuters that he agrees with one forest
industry analyst's prediction that Noranda Forest will earn at
least 165 mln dlrs in 1987.
    Noranda Forest's preliminary share prospectus, released
today, shows the company had 1986 pro forma earnings of 80.2
mln dlrs, excluding a 22.5 mln dlr extraordinary gain.
    Asked to comment on the analyst's forecast that Noranda
could earn about 200 mln dlrs this year, Zimmerman said, "I
think that he is directionally very correct."
    He also said Noranda Forest will consolidate financial
results of 50 pct-owned MacMillan Bloedel Ltd <MB.TO>.
    Zimmerman said Noranda Forest expects to raise at least 350
mln dlrs from its first share issue, making it one of Canada's
largest initial public offerings.
    Noranda Forest intends to issue about 15 pct of its common
shares to the public at first, but parent company Noranda Inc
"is prepared to let up to 49 pct of it go into the public hands,"
he added. Noranda Inc now holds all of the 79.9 mln outstanding
shares of Noranda Forest.
    Zimmerman declined to say when future secondary share
offerings might occur, although he said they will be made "as
soon as it's right" for either cash or other securities.
    Proceeds from the share issue will be used mainly to reduce
Noranda Forest's long term debt, listed pro forma as 1.36
billion dlrs at the end of first quarter, 1987, chairman
Zimmerman said.
    Noranda Forest's first priority will be to continue cutting
debt to "a comfortable, manageable level in all likely future
circumstances" or about 30 pct of capital, he said.
    "I think we learned last time around that although your
assets can support a high levels of debt, earnings can't
support associated interest in times of high interest rates,"
Zimmerman commented.
    Noranda Forest had pro forma operating losses of 8.6 mln
dlrs in 1985 and 2.9 mln dlrs in 1984 during periods of higher
interest rates.
    The company's pro forma 1987 first quarter results showed
net profit of 42.2 mln dlrs or 49 cts a share, up from earnings
of 4.7 mln dlrs or one ct a share, excluding a 22.5 mln dlr
extraordinary gain, in the prior year.
    Zimmerman also said the company will concentrate on
maintaining quality earnings from existing operations rather
than increasing operating volumes. "We are likely to spend money
to enhance our operations ahead of expanding them," he said.
    Noranda Forest would also be interested in buying the 50
pct interest it does not already own in Northwood Pulp and
Timber Ltd from Mead Corp <MEA> for between 150 mln and 200 mln
dlrs, Zimmerman said.
    Noranda Forest and Mead each have the right of first
refusal the other's Northwood holding, but Mead likely is not
anxious to sell, he added.
    Noranda Forest's initial dividend policy will be to pay 10
cents a share quarterly. When asked, Zimmerman agreed the
dividend was small compared to cash flow, adding the company
will later "establish a typical or sensible dividend policy."
 Reuter
