CPI “regains respect” but still hurting as profits sink into the red

The paper and equipment group reported sales of $169.4m for the six months to 31 December 2010, a 17.9% drop from $206.4m in the corresponding period last year.

Its underlying EBITDA (earnings before interest, tax, depreciation and amortisation) was $2.7m, a year-on-year fall of 40%. This pushed its net pre-tax profit line to a $739,000 loss for the half year, a $2.8m fall from the $2m profit it posted in the six months to December 2009

The fall in revenues was blamed on a combination of weak demand and loss of market share to rivals.

Managing director Bernard Cassell used CPI’s statement to the ASX to say: “Trading conditions remain difficult with volumes still below the levels of two years ago. In a response to these conditions, we are witnessing some aggressive market pricing as competitors seek to quit stock and maintain volumes.”

He told ProPrint that CPI’s tenuous market perception during the GFC had also driven sales to rivals. “We were placed at a very difficult position. Having just done an acquisition completely funded by debt just before the GFC, we were forced to make a lot of adjustments that others didn’t.

“While we had to make all those changes, our competitors were – quite fairly – out there telling customers: ‘we aren’t making those changes’. I feel customers backed the certainty rather than the change,” said Cassell.

The biggest change has been CPI’s program to rationalise its 16 warehouses to have a single site in each state. Cassell pointed out that this initiative had been a downward driver the figures.

“If we had already completed the warehousing rationalisation, we would have had around a $3m contribution – and that suddenly changes the complexion of the business greatly.”

However, Cassell stressed that CPI is back on an upward trajectory. “We do believe we have stabilised out business. We do believe our offering to market is good. We are now fully respected in the market again for what we can deliver and our reputation has been recovered, but it takes a long time to get that stuff back.”

In one bright spot in the half-yearly accounts, CPI has paid down its debt by $6.8m to $32.5m, “the lowest level in over three years”.

The half-yearly figures could be the final set of accounts lodged with the ASX if the acquisition by Maui Capital goes through and CPI becomes a private entity.

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