The merchant giant announced today that its financial position had deteriorated from its half-yearly loss of $61 million due to “difficult trading conditions” in the second half of the year.
Paperlinx shares slumped to a historic mid-market low of 6.6c on the news.
The announcement comes after recent news that Paperlinx would be closing its global headquarters, disbanding its global marketing and global human resources departments and cutting corporate costs by 35%.
Paperlinx told the Australian Securities Exchange (ASX) that the commercial paper market had seen market declines of 20-40% in the past three years and predicted a further decline of about “3% to 5% per annum in most of the markets that Paperlinx serves for the foreseeable future”.
The company said it would raise a net sum of $93 million after striking a deal to sell the American operations of Spicers USA and Kelly Paper for US$76m ($76 million) and receiving regulatory approval for the previously announced €45 ($56 million) sale of its Italian operations.
Paperlinx also expects to gain $39 million from an internal loan restructure that aims to reduce foreign exchange risk and allow the close-out of an in-the-money currency option.
“Proceeds from asset sales and close-out of the currency option [will] be used to reduce debt, fund restructuring, provide liquidity and enable refinancing.”
Chief executive Toby Marchant told ProPrint in April that Paperlinx was on track to return to profitability by 2014.
Chairman Harry Boon said the strategic review had “focused on reducing costs, strengthening the group’s financial position and creating a sustainably profitable business”.
He said Paperlinx had abandoned takeover talks with its mystery suitor – believed to be US private equity firm Platinum Equity – because it would now have “a significantly lower operating cost base”, “substantially improve[d] operating liquidity” and “a platform for a return to operating profitability”.
Paperlinx also said it would continue its push to sell more non-paper products, mainly packaging and sign and display.
Diversified products have “grown steadily” to now be 17% of total revenue and 23% of total gross profit, according to the company.
Paperlinx also announced today that it would not pay a distribution to Step-Up Preference Security holders on 30 June.
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