2006. The result was significantly impacted by a legal judgement awarded against the Group in its dispute with former supplier, Stora Enso.
The Group recognised nonrecurring expenses of $6.4m mainly in relation to the judgement, notwithstanding that an appeal has now been lodged.
CPI says its Australian operations were assisted by the continued positive results from its inks products. “The Group’s commitment to premium products and high quality service levels are seeing positive results emerge from this area,” it said in a report to the Australian Securities Exchange.
Volumes declined in the papers operations by approximately 4 per cent compared to the prior year comparative, however these were partly offset by gross profit margin improvements in the Australian paper operations.
This was achieved through changes in product mix, with selling prices being slightly down against last year. The improvements in the Group’s underlying profitability was largely driven by continued efficiency gains in distribution costs and administrative expenses.
The trading conditions overall continue to remain difficult due to the continuing low barriers to entry coupled with excess global capacity. The capacity closures announced by European suppliers are yet to make a meaningful impact on pricing largely because in recent times, a larger proportion of product is being sourced from Asia.
The Capital Equipment division incurred a significant trading loss during the first half of the financial year.
A significant number of orders were taken during the six months to December 2006. As a result, a strong trading result is expected in the division for the second half. The customer base is continuing to look for technological and scale based benefits from its investment decisions and as a result, individual machinery sales are growing in size and complexity.
The outlook for the Group’s core paper distribution activities is unchanged from previous announcements. Trading conditions are likely to remain difficult due to the factors previously described.
The outlook for the Group’s inks business is more positive, following its recent success in securing a large volume tender. The additional volume should ensure that the inks division continues to build on its steady progress to date.
The machinery division is now taking orders for the next financial year, which are showing some encouraging signs. The Board is satisfied with the low cost, low funds employed approach to this division as the Group has a very experienced and technically competent team. It continues to offer a suite of products that are among the best and most technologically advanced anywhere in the world.
“The Group will continue its efforts to grow its higher margin product base to improve overall shareholder returns but this is anticipated to be a medium term project. In the interim, the Group will also continue to explore initiatives to improve its efficiencies and shareholder returns,” concludes Bernard Cassell, CPI Group managing director.
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