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PaperlinX avoids going after high-risk business in Australia

Friday, 26 August 2011
By Print21

Walking away from high-risk business caused PaperlinX to lose market dominance in Australia. Still reeling from a number of high-profile printing company failures PaperlinX identifies its decision to not pursue high-risk business as a reason for its smaller market share.

In its annual report it lists the reasons behind a $25 million loss in the Australia, NZ and Asia region. These include;

  • Volumes down 8% largely due to depressed Australian print market
  • Lower selling prices due to stronger AUD
  • GP% increased on prior reflecting strong pricing disciplines
  • Christchurch still recovering form earthquakes
  • Diversified revenues grew by 17%

The local gloomy state of affairs was reflected in the overall company performance, which resulted in a significant loss of $108 million. PaperlinX claims this is made up mainly from non-recurring charges and costs.

The statutory loss is a step up on the merchants $225.3m slide last year, as paper volumes fell nearly 10 per cent year-on-year to 2.63 million tonnes. Goodwill impairment charges account for $35.1m in Australia and £20m in the UK.

Its full-year revenue of $4.67b was down from $5.23bn the year before largely due to the stronger Australian dollar, which had a $445m negative translation impact. Away from paper, PaperlinX diversified sign and display portfolio saw a 19% sales growth in Australia, New Zealand and Asia.

According to CEO, Toby Marchant, the results represent a transition year as it deals with legacy issues in order to create a platform for future profitability.

“While the loss is very disappointing, non-recurring costs and charges for impairment, restructuring, the currency option and discontinued operations make up the vast majority of this loss.

“We have seen another year of significant volume reductions in our key markets, however, most of our businesses have maintained or grown market share during this difficult period and all have responded well in managing their controllables, particularly in recalibrating the cost base and managing working capital.

Marchant says in spite of the macro economic malaise, the progressive development of its diversified businesses is an encouraging sign of things to come.

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