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Paper dumping dragging down local market – CPI

Thursday, 05 October 2006
By Print 21 Online Article

Gerry van Wyngen, chairman of CPI, claims that the local paper market is being hurt by excess international stock that is being sold into the local market at prices that are unsustainable for local merchants.

“Continued production surpluses at many paper manufacturers overseas has resulted in stock frequently being sold, some would say dumped, into the Australian market at low prices that often undercut many standard lines imported under normal trading relationships,” says van Wyngen, in the company’s annual report.

“In addition there are low barriers of entry to new merchants who, with the support of offshore manufacturer wishing to penetrate the Australian market, are able to set up low cost operations providing selected services only.”

van Wyngen says the situation has effectively forced Australian merchants to respond through either shrinking the size of the organisation and carrying fewer lines of paper, or by growing it substantially to lower unit overhead costs and obtain economies of scale. CPI falls into the latter category and has hinted that it may be looking into acquisitions in the near future.

“Industry rationalisation is a necessary requirement for the latter and CPI is well positioned to play a part in that when the opportunity arises, to attain a commercial return on funds invested,” says van Wyngen.

The chairman’s comments come shortly after the announcement of the full-year financial results for CPI, scraping in with a net profit after tax of $3.95 million, of which $3.265 million was sourced from the sale of its Braeside property – a result that van Wyngen describes as “clearly inadequate”.

“Trading margins fell once again, an experience shared by nearly all of the major Australian paper merchants, highlighting the persistent and increasing difficulties of the Australian paper market,” he says.

CPI’s machinery division performed a lot better during the year, including a $20 million run of press sales from Komori, but the company says it still suffered price competition that was often extreme. It claims on a number of occasions that potential sales based on quality and performance was lost to competitors undercutting them with prices well below cost.

“The various challenges outlined above have caused the company to continue to search for still further efficiencies and cost reductions, with considerable success, and to maintain the highest standard of service and product,” says van Wyngen.

“As an example, independent and customer testing of CPI’s inks has shown these to be amongst the best quality available, and to be at the forefront also on a value for price basis.”

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