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CPI profit slump

Thursday, 26 July 2001
By Print 21 Online Article

Currency fluctuations, depressed demand and aggressive competition in its paper division have buffeted the largest supplier to the printing and graphics arts industry, CPI.

Total revenues were down seven per cent to approximately $418 million according to unaudited figures. The company does not anticipate any significant changes to the final result that will be announced in August.

As a result of its performance this year CPI has taken itself out of the running to bid for PaperlinX companies Edwards Dunlop and Commonwealth Paper. According to Bernard Cassell, company secretary and finance director, the cost of raising capital now would make any bid for the paper merchants prohibitive. CPI Group was seen by many as the logical purchaser for the businesses, which must be sold by PaperlinX under an ACCC competition ruling following its merger with Spicers Paper.

Profits were down in all CPI divisions with Graphics taking the heaviest hit. The strong US dollar slashed margins on its Fuji film and plate sales while machinery sales were sluggish due to “economic conditions and the more difficult financial environment for capital equipment purchases.”

Revenues were also down in the Paper Division with the result being “exacerbated by the fall in margins over the last four months of the year.” CPI refutes industry analysts’ suggestions that it suffered a loss of market share due to aggressive competition from the PaperlinX group of merchants. Instead it blames general economic conditions for the fall in revenues.

The Trading Division “continues to under perform,” according to CPI, even after significant changes had been made. More time is required “for the benefits to flow through and a satisfactory return on investment is achieved.”

The company incurred a number of significant one-off costs this year, particularly in redundancies and relocation charges. It opened a major warehousing facility in Sydney.

Despite the poor result CPI is optimistic about the future, forecasting improving economic conditions. It wrote good machinery business at PacPrint and is expecting to negotiate some relief from its currency impost with main supplier Fuji. A price rise in consumables will take effect from August. (See story this bulletin).

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