The merchant’s half-yearly losses jumped from $10 million in the first half of 2010/11 to $61 million for the six months to 31 December 2011. Revenue fell 11% to $2.2 billion and net debt increased 7% to $214 million. The company also paid out $38.5 million more to suppliers and employees than it collected from customers.
Chief executive Toby Marchant described the results as “very disappointing” and largely due to “the sudden and severe reduction in paper volumes in Europe in the first half”.
Global paper volumes fell by 7% – 83% of which came from Western Europe.
Wednesday’s results showed that Australasian revenue fell 10% to $252 million and earnings dropped 41% to $5.5 million.
Australasia provided 11% of Paperlinx’s revenue, while North America ($452 million) provided 21% and Europe ($1.5 billion) 68%.
Europe accounted for a pre-tax loss of $45.8 million, while North America posted a $7.1 million pre-tax profit and Australasia posted a $5.5 million pre-tax profit.
Paperlinx’s executive general manager for corporate affairs, James Orr, told ProPrint that while it was difficult to compare regions, “Australia hasn’t performed as well as we’ve hoped”.
“Australia has suffered from the general market conditions in the industry,” he said.
Paperlinx said its global results had been “severely impacted by [the] European economic crisis”, which had “led to volume, price and margin reductions”.
However, the company said it had a “clear and deliverable plan to restore profitability” – although Orr wouldn’t reveal when that was expected to happen.
The plan includes “asset sales” and a “major restructuring of continental Europe”, which is expected to “result in a strengthened balance sheet and a sustainably profitable business”.
Paperlinx said last year’s restructuring was almost finished and had gone better than expected. The benefits are expected to start flowing in the second half of the financial year.
“Other opportunities to reduce costs and restructure the business model are supported by the board,” the company added.
Paperlinx is also looking to “growth in the diversified sectors” as a way of returning to profitability, according to Marchant.
“We saw strong and profitable growth in diversified in all regions in the first half and we will continue to actively reallocate resources to these sectors from the declining paper sector,” he said.
Paperlinx’s also revealed there were “a number of parties” interested in taking over Paperlinx.
Until now, only one solid approach had been announced, thought to be from US-based Platinum Equity.
The results also contained bad news for the holders of Paperlinx’s “hybrid” securities.
Distributions of its Step-Up Preference Security holders cannot be made before September 2013 without the approval of the European lender.
Prominent hybrid security holder Graham Critchley said he was disappointed by the news, but not surprised, and that “if I was the lender I might make the same decision”.
He also said Paperlinx’s problems could be simply diagnosed: “They can’t sell paper at a profit.”
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