PaperlinX lifts ASX trading halt as European disaster spreads
PaperlinX has placed part of its struggling European operation into administration just two weeks after the collapse of its UK business.
Andy Preece, CEO, PaperlinX, said the company was forced to call in administrators after ‘exhaustive efforts’ failed to secure a sale of the PaperlinX Benelux division.
“When it became clear that the business could not be sold as a going concern and with the pending withdrawal of the ING Dutch financing facility, the local directors had no choice but to request the court to commence an administration process,” said Preece. “We deeply regret the impact this will have on employees and all stakeholders of the Benelux operations in the Netherlands and Belgium, but given the circumstances the commencement of this administration process was the only option.”
Up to 375 jobs are expected to be lost at Benelux, on top of 700 jobs that were cut from the UK business on 1 April. Administrators at Deloitte this week laid off a further 70 workers in the UK.
PaperlinX has now lifted its trading halt on the ASX after almost three weeks. In a statement, the company said: Given this announcement and clarification of the withdrawal of the Dutch ING facility, PaperlinX has requested that the voluntary trading suspension be lifted by the ASX to allow trading to commence in its ordinary shares.
Paperlinx shares immediately jumped from 1.7c to 2.3c on hopes that ditching the failing European and UK arms would provide a boost for the company’s business in Australia, New Zealand and Asia (ANZA). Preece again stressed that PaperlinX’s ANZA operations would be protected as European creditors seek to recover funds.
“PaperlinX’s successful and profitable business operations in Australia, New Zealand and Asia have financial separation from European operations. The day-to-day businesses and operations of the ANZA region remain unchanged. We have been completely open and transparent about the problems in our European operations for some time but our many repeated attempts to restore profitability have failed. PaperlinX has over the past five financial years, invested substantial funds into the restructuring of the European operations, particularly in the Benelux and the UK. However, it has unfortunately not been possible to effect a turnaround in performance. It is therefore no longer in the Company’s best interests to continue funding significant restructuring initiatives in the region or to support ongoing trading losses.”
In its statement to the ASX, the company added: Whilst the appointment of administrators to the Benelux and UK businesses may have an impact on the remaining European businesses, PaperlinX continues to progress the sales or ‘realisations process’ of its subsidiaries in Austria, Czech Republic, Denmark, Germany, Ireland, Poland and Spain.
PaperlinX is not expected to receive any material direct benefit from a sale of any of its European businesses, as any proceeds will benefit other European stakeholders. There’s continued speculation that potential bidders are preparing offers for the PaperlinX UK operation.