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Ink win and changing paper mix lift CPI half-year results

Thursday, 01 March 2007
By Print 21 Online Article
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Winning the GEON ink contract (see Dateline News below) delivered CPI’s ink division a step up in its growth strategy. It provided a bright spot in an otherwise grim tale of continuing battles to improve margins in the face of falling paper volumes.

The company’s change in paper grades and its development of higher margin business, mainly in Australia, provides a way forward, according to David Bull, director. “We’ve changed the mix and added some more value grades. CPI is recognised for offering a quality range of products and the market is responding to our expanded portfolio,” he said.

Severe price cutting in commodity paper grades in the New Zealand market has had an impact on all suppliers as the market realigns. Complex personnel movements between the paper merchants have seen unprecedented deals drive margins to a new low.

CPI’s half-year result was reported to the ASX as a net loss of $5.8 million, mainly due to a judgement in a court case against Stora Enso. The payment was included in the accounts although CPI intends to appeal the verdict. Apart from that payment, the company reported an improved EBIT over the prior corresponding period.

In its ASX report it stated that paper volumes declined … by approximately four per cent compared to the prior years. However, these were partly offset by gross profit margin improvements in the Australian paper operations.

CPI’s capital equipment division had a bad start to the year but took a number of significant orders prior to Christmas and is expected to deliver a strong trading result in the latter half.

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