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When Harvest Pro merged with Smith and Davies to become Kiwi Forestry, Hayes Knight was there to support the newly formed company every step of the way...

As featured in Idealog Magazine Nov/Dec 2012.  Download this case study.

When you've been a stalwart performer in the forestry transport and civil
infrastructure sector for more than 80 years and never had an independent audit, surely you're doing fine without one? She'll be right - right? Not necessarily.

Smith and Davies had been in business since 1927, but after merging with Harvest Pro to create Kiwi Forestry International, former Smith and Davies manager Graham MacKinnon was glad he inherited Harvest Pro's auditor and advisor Hayes Knight.

"We had to ensure we were using the best internal systems," MacKinnon says. "After merging two private companies into one, with an international corporate partner, obviously the reporting requirements changed dramatically." 

Hayes Knight Audit Director Craig Fisher and Kiwi Forestry
Executive Director Andrew Chalmers

The company now offers a completely integrated supply chain incorporating forest management, harvesting, roading and civil infrastructure works, log and transportation services, and export and domestic log trading.

The joint managing director credits Hayes Knight audit director Craig Fisher and his team for helping them achieve a seamless synchronisation of accounting and reporting systems, which ensures the right decisions are made about New Zealand's 'wall of wood'.

Forestry is a significant industry in New Zealand, contributing an annual gross income of around $5 billion, 3 percent of New Zealand's GDP and directly employing around 20,000 people. Wood products are New Zealand's third largest export earner behind dairy and meat. The sector is entering an exciting new phase, as wood production volumes are expected to increase significantly in the coming years as forests planted in recent decades reach maturity.

"We needed to get it right from the start and we had to make sure our house was in order," MacKinnon says.

The audit and advisory services offered by the Hayes Knight team included assisting with the merger of two financial systems, adopting more rigorous financial reporting disciplines needed for independent audits and preparing consolidated financial statements for the much
larger combined group.

Kiwi Forestry also adopted the much more complex International Financial Reporting Standards, which Fisher knew was key in ensuring information they were generating for new audiences was "reliable and credible". 

Moving forward as a new company with a solid foundation of financial and operations information has allowed the company to think big.

"Kiwi Forestry is certainly gaining traction in the market now that we can offer a fully integrated supply chain. This is where we can capitalise on huge opportunities overseas." MacKinnon remains adamant about the
growth trajectory the business is on and despite the global slowdown, the company has established a strategic relationship with Japanese industrial heavyweight Itochu Corporation of Japan. Itochu is recognised as one of Japan's leading trading houses with annual turnover of US$145 billion.

Joint managing director Zane Cleaver also understood that if opportunities to step up to the world stage came, their accounting, governance and managerial systems would need a makeover.

"We needed to secure raw materials and provide excellent service, but also present ourselves as credible and reliable to outside partners," Cleaver says. So when Itochu came knocking, the hard work of Kiwi Forestry and the Hayes Knight team paid off.

Hayes Knight audit director Craig Fisher applauds the company for succeeding where many other Kiwi companies fall short - evolving their back room procedures with their revenue gains and growth opportunities. Fisher is certain that the partnership between Kiwi Forestry and the Japanese multinational would not have occurred without the more mature financial systems and reporting.

"They had the foresight to recognise they needed to work on the not-so-exciting financial systems and reporting at the same time as they were looking strategically ahead to grow the business following the merger," Fisher says.

"It's sad, but often when Kiwi companies get a chance to supercharge their growth, they have to madly scramble to backfill their reporting competency - but not Kiwi Forestry. The company is a great example of a merger formed from innovative strategic thinking."

Executive director and chairman Andrew Chalmers agrees the ongoing relationship with Hayes Knight is a strong one built on shared values and trust, which can put the company in good stead no matter what the challenge. "In our period of growth and opportunity, Hayes Knight is the best fit for us, because they all put forward their best efforts every time."

If you have a query regarding independent audits, or wish to discuss any of the points in this article please contact:

Craig Fisher 
Audit Director

T: 09 367 1654
E: craig.fisher@hayesknight.co.nz 

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