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PaperlinX CEO welcomes shareholder input

Wednesday, 28 March 2012
By Print 21 Online Article

As the head of PaperlinX Europe, Toby Marchant holds no illusions that Andrew Price will back down from challenging the board. And that is not a bad thing. Involved and interested shareholders are needed to keep the company on the right path, he tells Cameron Boggs in a phone interview from the UK.

According to Marchant, the group’s senior management know exactly what situation the company is in and what needs to be done to fix it. “Now that the EGM is out of the way I don’t think Andrew Price’s bid has caused any actual damage to the organisation at all. It has only strengthened our resolve to show that we can fix this business, because at the end of the day that’s what this is all about,” he said.

“The meeting helped us highlight the fact that there is an awful lot we have to get on with. I think it has given a needed sense of urgency to the business. He would like to do everything tomorrow, and so would I, but things can only be done with investment.”

The head of the merchant group said Price’s approach at the EGM is not fundamentally different to the company’s stance that urgent and serious aggressive action is needed. Marchant (pictured) acknowledged that PaperlinX needs more funds to properly restructure than the €45 million (A$57.5m) it acquired through the sale of its Italian business, Polyedra, to European paper manufacturer Lecta.

“We need to restructure our Europe operations and plans are already well advanced, with an internal governance structure in place to ensure that’s done as thoroughly and quickly as possible. We need to make sure we continue to grow; we can’t just shrink our way to prosperity.

“There are lots of opportunities to grow across the business and we’ve got to ensure that we continue to invest via reallocation of business resources.”

PaperlinX is forging ahead with its three-part strategy to return profitability to the group. The plan starts with selling assets, strong investments in streamlining the business to get the cost base down (particularly in Europe), then pursuing its growth agenda.

“Those three tracks will lead this company back to prosperity, since staying where we are is not an option. The organisation simply has too many legacy burdens to prevent or avoid selling assets. We have certain parts of the business that we are willing to sell because we know that the look of the company post-sale makes sense and is inline with our long-term objectives,” he said.

Paper will remain the core of the PaperlinX’s business for the foreseeable future, however a return to profit is dependent upon the group’s aggressive diversification plan. It has already moved into the sign & display, digital and packaging sectors. Its foray into the industrial plastics sector has seen the group produce riot shields and glass for tanks.

Marchant is taking a cautious approach to true diversification, in that he recognises the risks involved in moving into radically different territories. Essentially the company is taking the same products it has been supplying to its traditional customer base into a new market.

According to Marchant, the group’s strategy assumes the uncertainty in Europe will continue. “We’re not assuming any improvement. We’re restructuring our businesses on the assumption that it stays as bad as it is, so any positive change represents a significant upside for the company. If we get Europe in the right space then the business looks radically different.

“I think our biggest threat is the uncertainty of where is this industry going to end up in terms of the world’s demand for ink on paper. We will be able to adjust to whatever comes, as part of restructuring is also streamlining our businesses so that the company is able to flex with market conditions.”

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