Update from John

In our last issue of Stevenson Way we announced that the Stevenson portfolio of businesses is carbon neutral, based on a URS report completed in May 2008. We are proud of our unique status as a committed sustainability partner in the construction and resources industries and remain committed, despite the incoming Government’s plan to review the Emissions Trading Scheme.

It seemed appropriate in this issue to focus on transport and fuel use. The transport sector has experienced a very hard winter and Stevenson has felt this acutely. We are a reasonable-sized operator and rely on our fleet to get product to customers in a timely and efficient manner. We take a holistic view of efficiency. The Stevenson staff who are working in this area are top class and we are fortunate to have them on our team.

As we are all aware, the credit crisis has spawned an unprecedented level of fear and distrust in our core economic infrastructure. Like all economies – the New Zealand economy is built on confidence. It is clear that the very foundations of our economy have been put through a major stress test. We are well and truly perched on the edge of an economic precipice. However, on the flip side, there is an avalanche of potential infrastructure catch-up that the Government could usefully stimulate, which would prevent the economy from getting any worse. Thankfully, the early signs of urgency from the new Government are greatly encouraging.

These are difficult times for which there is no precedent. The world that emerges post-credit crisis will be very different from the one which entered it. This new environment will necessarily be considerably deleveraged, necessarily more risk averse, and the cost of both capital and debt is likely to be markedly higher than we have been used to. I suspect that this is a systemic change and it will have a major impact on how we all do business in the future.

Although you may think that I appear to be negative about the state of the world – in fact, I am not. I see a world of opportunity ahead for New Zealand. By adopting a healthy sense of realism around the magnitude of the problems, and a positive frame of mind about opportunity, NZ Inc can, and will, get through this crisis.

Even if you exclude the credit crisis, it has been a tough year for everyone. For Stevenson, in addition to the rapid slowdown in the New Zealand economy, the rain of winter ’08 had a major impact on our operations. When it rains every day for almost three months, it is difficult to lay paving and concrete. Our mines became lakes and our farms were lashed by either snow or rain. While our size means we can endure these tough times, we feel for the many smaller operators who have not made it through the winter, or who struggle in the face of adversity to remain positive.

At Stevenson, we’ve used the quieter time to continue to invest in the development of our people, to review our portfolio of businesses and to consider what the future holds. We are also committed to ensuring that Stevenson is in the best possible shape to both survive the challenges of the current market – and importantly – that we are well positioned for the eventual upturn when it occurs. Part of this work includes a commitment to reconfiguring our head office function to reflect the increasingly decentralised world of Stevenson. As a result, we have been busy looking for new head office premises that will more appropriately reflect our new structure. You’ll hear more about this in the New Year.

On behalf of all our staff, directors, and the Stevenson family, we wish you all the best for an improved climate in the coming months – both business and weather. After a tough year, we sincerely hope that it will include a long hot summer, where demand is heavy and the fishing on weekends is rewarding! Have a great holiday season.

John Rae

Managing Director, Stevenson Group