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WAN signs off on massive $167m production upgrade

Thursday, 06 April 2006
By Print 21 Online Article

Following the signing of a $28 million deal with Merit Projects for the construction of the new complex at Herdsman, Perth, all major contracts are now in place for the scheduled upgrade of WAN’s print production facilities.

The total $167 million price tag will also include the much trumpeted $82 million contract with KBA for the cold-set and heat-set printing presses and reel handling equipment, a $40 million deal with Ferag to provide automated publishing equipment and $2 million with Kodak for its CTP solutions.

John Rowsthorne, general manager of special projects for WAN, says the new facilities will offer the newspaper publisher a huge boost over its existing production capabilities.

“WAN is currently operating with equipment that is between 15 and 20 years old, restricting us in a number of ways including colour, size, inserts and preprints,” says Rowsthorne. “The existing equipment simply isn’t capable of doing a lot of things, and basically restricts us to publishing in a tabloid newspaper format.”

Rowsthorne confirms the new print equipment will enable WAN to produce up to 224 pages in a single pass, and the five different available web lengths will allow the publisher to print a wide variety of different sized products.

“It’s a significant step forward for us,” says Rowsthorne. “The technology is significantly advanced over what we already have, allowing us to produce at twice the speed of our existing press lines with about half the staff.”

WAN claim a complete overhaul of its existing facilities was necessary to take advantage of the new technology on offer. The presses purchased from KBA will be placed in the buildings due for construction this year, while the Ferag finishing equipment will be placed in the existing Herdsman premises.

Redundancies at WAN

The wide-reaching print upgrade will also result in the shedding of 214 full-time employees, with agreements reached with staff and unions to apply redundancies as each phase of the project is completed. The total cost of redundancies relating to the upgrade is estimated at $30 million.

With all of the major contracts and expenses for the project locked down, WAN has updated its estimates of the financial impact of the production upgrade on company earnings. These include estimates for 2008/09, the first financial year that the benefits from the upgrade will be realised.

The earnings per share of WAN will be impacted by the accelerated depreciation required on the old equipment that will be replaced as part of the upgrade.

The company estimates that earnings per share will reduce by 18.3 cents for the 2005/06 financial year, and 5.6 cents in for the 2006/07 financial year.

The company forecasts that the production upgrade will increase earnings per share by 3.4 cents in 2007/08 and 7.6 cents in 2008/09, by which time it expects to derive savings in both labour and print costs, as well as picking up additional revenue from colour advertising and external printing.

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