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Gunns Limited

ANALYST BRIEFING NOTES

Six months ended 31 December 2007

Bell Bay Pulp Mill Project Update

March 2008

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HEADLINES

DEC 07 DEC 06

Revenue $378.3m $293.4m

EBIT $ 54.0m $47.0m

Profit After Tax $ 14.9m $20.5m

Cash Flow from Operations $ 55.6m $(3.0)m

EPS 3.4 cents 4.9 cents

Dividend per Share 6 cents 6 cents

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REVENUE

Revenue $378.3m (Dec06 half: $293.4m)

Forest product revenue at $303m– Woodchip volume up 5% on prior year first half– Auspine revenue recognised of $79m

MIS plantation development services revenue of $14m compared to $20m in the first half of 2007

Merchandising revenue consistent with the 2006 first half

Construction revenue down by up by 20%

Tamar Ridge Wines revenue up by 21%

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EARNINGS

Non-operating expense of $8.4m from hedge revaluation

FOREST PRODUCTS– Earnings at $48.5m (p.y.c.p $32.7m)– Earnings uplift from Auspine acquisition– Hardwood woodchip margin impacted by seasonal log cost increases– Hardwood timber selling price under pressure– Improving softwood timber margins

MERCHANDISING, CONSTRUCTION, WINE– Earnings up 13% on prior year comparative period

MANAGED INVESTMENTS– Plantation development reduced with lower FY 2007 deferred revenueF

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BALANCE SHEET

IMPACT OF AUSPINE ACQUISITION

– Inventory $38m

– Receivables $41m

– Standing Timber $225m

– PPE $294m

– Payables $88m

– Borrowings $372m

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OUTLOOK

FOREST PRODUCTS– Hardwood timber

• Domestic market remains weak• Export volumes maintained in face of high $A

– Softwood• Solid demand for sawn product and woodchip• Margin improvement from price increases over H1

– Woodchips• 2008 benchmark hardwood price set at $207.40 BDMT• Increasing demand from China mills• Softwood price up to $US170 BDU from 1 January 2008• Global supply changes are impacting the market

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OUTLOOK

MERCHANDISING, CONSTRUCTION, WINE– Expect full year revenue growth

• Redevelopment of Launceston merchandising store completed in July 2008

– Tamar Ridge wine sales up 30% on year to date• Harvest from MIS plantings commenced in FY2008• Targeted 100,000 case sales in FY 2009

MANAGED INVESTMENT SCHEMES– Development targets for 2008 financial year

• 15,000 hectares of plantation• 30 hectares of vineyard• 550 hectares of walnut

– FY 2008 Projects in the market

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AUSPINE ACQUISITION

Initial 26% holding from May 2007Acquisition completed 21 February 2008– Equity cost $345m– Enterprise value ~$500mStrategic value in Gunns group– High quality plantation asset

• 46,000 ha freehold land• 40,000 ha softwood plantation

– Diversification of resource base• Green Triangle location• Softwood

– Access to high growth softwood timber market

Synergy benefits– Timber distribution– Plantation management

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BELL BAY PULP MILL PROJECT UPDATE

Agenda

Overview of pulp mill project

Pulp market and sales overview

Project structure and contracts

Financial returns and risk mitigation

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1. OVERVIEW OF PULP MILL PROJECT

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Located in the Bell Bay Industrial Zone, Tasmania

1.1 million tonnes of Bleached Hardwood (Eucalypt) Market Pulp

Proven production technology

Environmental controls are Best Available Technology

Total project cost approximately A$2.0 billion

Experienced project development partners

1. OVERVIEW OF PULP MILL PROJECT Project outline

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Leveraging a high quality, efficient and world scale sustainable resource

Value adding to existing operations

Forward integration into value chain to secure margin

Globally competitive cost position from mill located at forest resource

Close proximity to high growth pulp markets (China and India)

1. OVERVIEW OF PULP MILL PROJECT Why is this a good project for Gunns?

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1. OVERVIEW OF PULP MILL PROJECT Mill Location

1 . Wood Processing Plant

2 . Sewage Treatment Plant

3 . Manganese Alloy Smelter

4. Wood Chip Mills

5. Major Port Facility

6. Aluminum Smelter

7. Metal Manufacturer

8. Electricity Sub Station

9. Electricity Exchange

1 0 . Thermal Power Station

11. Wood Chip Mills

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1. OVERVIEW OF PULP MILL PROJECT Mill Location

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1. OVERVIEW OF PULP MILL PROJECT Current project status

Startup3Q10

Inception

January 04Feasibility study

commenced

February 05Bell Bay location

selected

July 06Completion of

Integrated Impact Assessment

John Holland / Macmahon alliance partners selected

August/October 07Approvals from

State and Commonwealth

2Q08Commencement

of civil works

4Q08Start of equipment

deliveries

4Q08Completion of

bulk earthworks

1Q09Commencement of

erection worksNow

1Q10Mill

commissioning

Calendar year

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2. PULP MARKET AND SALES OVERVIEW

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2. PULP MARKET AND SALES OVERVIEW Market growth

Consumption of Bleached Hardwood Market Kraft Pulp (BHKP)

0

10

20

30

40

50

60

70

80

1980 1985 1990 1995 2000 2005 2010 2015 2020

Million tons

Rest of Asia

North America

Western Europe

JapanEastern Europe

China

Latin America

ForecastRest of the World

Source: World Trade Atlas; Pöyry

Continued growth in demand for hardwood market pulp globally with rapid Chinese growth continuing to be met by imports

Chinese Imports of Pulp

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0 500 1,000 1,500 2,000 2,500

Barra do Riacho Unit

Riaupulp

Mucuri Mill

Bell Bay

Belo Oriente

Jacarei

Santa Fe Mill

Fray Bentos

Eunapolis

Athabasca

Capacity 1 ,000t/ a

At 1.1M ADT Gunns will be in the top 10 market pulp producers in the world and the pulp mill will be in the top 5 largest pulp mills in the world

2. PULP MARKET AND SALES OVERVIEW Market position

0 500 1,000 1,500 2,000 2,500 3,000 3,500

RGM/APRIL

Aracruz

Votorantim

Suzano

APP/Sinar Mas

Botnia

Cenibra

ENCE

Gunns

CMPC

Capacity 1000t/ a

Current Capacity Approved Expansion Capacity

Top 10 BHKP Global Producers Top 10 BHKP Global Pulp Mills

Source: Pöyry

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2. PULP MARKET AND SALES OVERVIEW Cost competitiveness of the pulp mill

Bell Bay will have a highly competitive position on the global cost curve, driven by proximity of mill to fibre, mill to shipping and advantageous proximity to Asian export markets against North and South American competitors

Source: Pöyry

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3. PROJECT STRUCTURE AND CONTRACTS

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3. PROJECT STRUCTURE AND CONTRACTS Pulp mill structure

Proven world scale mill technology– 1.1 m ADT capacity (significantly expanded from initial concept and cost estimate)– 216 MW power generation (ave. 100MW surplus power)– ECF bleaching process– Leading edge environmental controls (odour control, air and water emissions)

Recent comparable installations – Veracel (Brazil), Botnia (Uruguay), Santa Fe (Chile), Nueva Aldea (Chile)Comparable mills have been commissioned on time with effective ramp ups to capacity

Wood Handling Fibre Line Pulp Dryer

Evaporation and Recovery

Power Boiler Turbine Effluent Treatment Raw Water

Energy Island Water Treatment

Pulp Production

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3. PROJECT STRUCTURE AND CONTRACTS Project structure

Fully developed contracts for core equipment, civil engineering and constructionDetailed costings and scope of workProject cost includes 5% contingency

Gunns Limited

Gunns Bell Bay Pulp Mill ProjectA$2,000million

Civil Engineering & Construction

John Holland/MacMahonA$700m

Equipment Supply & Erection

Andritz & selected suppliersA$1130m

Other Equipment & Gunns’ Costs

Other SuppliersA$170m

Owner’s Engineers

Pöyry

Project A

lliance

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Gunns project team

Pöyry1 as Owner’s Engineer – overseeing project implementation

John Holland / MacMahon civil engineering and construction alliance– Risk sharing arrangements – cost savings/overruns

Core equipment supply by Andritz2

Erection management contract with Andritz

Mill commissioning and technical support from Andritz

Production guarantees from Andritz

3. PROJECT STRUCTURE AND CONTRACTS Project management and control

1. Pöyry is the world’s leading consulting and engineering company for the forest products industry. It is publicly listed on the Helsinki OMX exchange and has a market capitalisation in excess of €900million (13/03/08)

2. Andritz is a global market leader in the supply of customised plants, systems, and services for the pulp and paper industry. It is a publicly listed company on the Vienna stock exchange and has assets of €2.5billion (31/12/07) and a market capitalisation in excess of €1.7billion (13/03/08)F

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3.7 - 4.0m GMT fibre requirement

Majority and increasing supply from Gunns managed resource

20 year wood supply agreement with Forestry Tasmania for plantation and regrowth wood

Mill will only use plantation and regrowth fibre - No old growth fibre will be used in the pulp mill

No changes to forest management or regulation required to supply the mill

3. PROJECT STRUCTURE AND CONTRACTS Wood supply agreements

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Project has received state and federal government approval following stringent environmental analysis and extensive public input and consultation.

Pulp mill technology represents ‘world’s best practice’

Monitoring and controlling of mill operations to follow strict standards and procedures

Pulp mill project is Equator Principle compliant

Federal approval was reviewed by Australia’s Chief Scientist and an advisory panel:

“operating in compliance with the stringent conditions applied there is a very strong possibility that the pulp mill will operate with an environmentally neutral footprint”

3. PROJECT STRUCTURE AND CONTRACTS Environmental

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Mill is well located for delivery to key high growth Asian markets

Eucalyptus kraft pulp is in high demand in growing product segments

Pulp output to be certified under internationally recognised PEFC system

Cornerstone distribution agreements for key markets– Asia (excl. Japan)– Japan– Europe and Middle East

Targeted volume commitment for 100% of production

3. PROJECT STRUCTURE AND CONTRACTS Marketing

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4. FINANCIAL RETURNS AND RISK MITIGATION

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4. FINANCIAL RETURNS AND RISK MITIGATION Revenue1,2

Revenue (A$m)

Sales Volume (ADT) 1,000

AUD/t 830

Gross Sales Revenue 830

Freight & Sales Commission 70

Net Sales Revenue 760

1. Based on current market pulp price and exchange rates2. Assumes pulp mill operating at ~90% of nameplate capacity of 1.1Mt

Historical Price of BHKP ($AUD Nominal)

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4. FINANCIAL RETURNS AND RISK MITIGATION Profit and loss1,2

Profit & Loss (A$m)

Pulp Sales Revenue 760

Variable Costs3 (fibre, energy, water, chemicals) 250

Fixed Costs (labour, maintenance) 80

Total Costs 330

EBITDA 43052

Depreciation 60

EBIT 370

1. Based on current market pulp price and exchange rates2. Assumes pulp mill operating at ~90% of nameplate capacity of 1.1Mt3. Variable costs include a credit for the sale of surplus power and Renewable Energy Certificates (RECs)

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4. FINANCIAL RETURNS AND RISK MITIGATION Funding Structure

Final terms are currently being negotiated on the project financing structure for the pulp mill– Non-recourse funding package – Banks demonstrating support for the project– Financing arrangements will be outlined when finalised

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4. FINANCIAL RETURNS AND RISK MITIGATION Risks

Risk MitigantWood supply Substantial and expanding Company controlled resource

Tasmanian plantations are highly productiveLong term supply contractsSoftwood processing capacity

Construction (investment cost and timing)

Strong experienced development partnersSignificant up front design and engineering completedCivil engineering allianceSingle core equipment supplier under fixed price contractStrong mill performance guaranteesCosting incorporates risk/gain sharing and contingenciesProject management cost budget of $200m

Operations Andritz to provide 12 months operational support during commissioning and ramp-upComprehensive environmental management systems

Market Target of 100% (currently 60%) volume commitments with internationally recognised counterparties

Pulp price Strong fundamental demand outlookFor

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4. FINANCIAL RETURNS AND RISK MITIGATION Project Management

Gunns project team has been staffed by up to 40 members dedicated to the design and approval process since January 2004

The team’s work has been supported by the international resources of Poyry Forest Industry, the engineering expertise of the John Holland/MacMahon alliance and a range of environmental and engineering experts

Les Baker

Project Manager

Sven Lundgren

Procurement Manager

Richard Fawkes

Environmental Manager

Calton Frame

Resource Manager

Greg Stanford

Infrastructure ManagerF

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SUMMARY

Mill is a significant value creation opportunity for Gunns

Gunns controls a high quality, low cost wood resource

Limited global opportunities to develop world scale mills

Pulp production diversifies Gunns’ market base into growth regional and product segments

Pulp production generates superior margins

Mill represents the best available environmental management technology

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