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The Price of success – one year on

Thursday, 21 August 2014
By Patrick Howard

PaperlinX claws its way back towards profitability through a combination of cost cutting and focusing on margins in sustainable businesses.

A statutory loss after tax of A$63.6 million for the year ended 30 June 2014 may not seem like good news but it is when compared to the loss of A$92.8 million for the previous year. That’s the situation with PaperlinX one year after Andrew Price took on the role of CEO and moved to London to sort out “the mess.”

It’s been a year of rationalisation, savage cuts to employee numbers and taking on the entrenched and generous employment benefits that bedevil continental Europe. According to Price, in Sydney to present the annual report, the actual situation on the ground when he arrived in London was worse than he imagined.

Andrew Price, CEO, PaperlinX

“It’s surprising how bad it was on the inside. It came after years of neglect. The company was in deep trouble and heading for a dark place,” he said. “It’s been a hectic year, full of change. A lot of people could not see that the old ways of doing business were over. Many could not accept that.”

Far from cavalier about the cost cutting, Price recognises that many of the employees he let go were, “good people who did a good job. It wasn’t their fault, it was management failure.”

However he is confident the turnaround has begun, nominating the task of instilling belief and convincing people within the company and the shareholders that it could be done as the hardest challenge. Morale is now coming back as the results come in.

Price claims the situation for PaperlinX is a microcosm of the whole printing industry. “We must have belief in ourselves and our future. We can’t just do more of the same,” he said.

The company press release said, Worldwide, trading conditions in our established paper markets remain challenging and changes in the competitive landscape further reinforce the need to redefine our merchant model and focus on growing our diversified businesses as part of our longer term strategy.

The company’s Canadian and ANZA operations are “the jewel in the crown,” according to Price. The profitable local company continues to improve under local management guidance and initiative. Much of the future development will come from outside its core paper products. In the statement the company said, In response to the declining demand for commercial print, mainly due to the impact of technology on a global basis; generating growth through diversification remains a key objective going forward.

This includes a development of packaging materials supply as well as wide-format equipment and substrate sales. In Canada there is also a sound printing plate and consumables business.

The company also reported a reduction in net debt of 24% since June 2013 and a 2% increase in sales revenue. Working capital balances were significantly lower than last year, a positive change that has seen an inflow of operating cash flow of A$50.7 million.

Despite continued challenging trading conditions in the UK, Benelux and Germany; the Group’s performance in Europe significantly improved. Underlying EBIT loss was reduced by 44%, from €(28.6) million in FY13 to €(16.0) million. And the company says that it expects to see the full benefits of the cost savings achieved through its restructuring activities, particularly in the UK, the Netherlands and Germany flow through in FY15 and beyond.

As a result of the positive cash flow for the year, largely due to a significant improvement in working capital management and improved earnings, net debt at year end was at a historical low.

Price is heading back to London over the weekend to tackle the ongoing restructuring of the business. “It’s more of the same, no different; its a focus on profit, margins and the cost base.”

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