The company, which is the second biggest paper supplier in the country with an estimated 35 per cent market share of the $1.4bn Australian printers spend on paper, recorded underlying EBIT of $5.9m, an increase of 24.2 per cent over the previous year, however significant non-recurring costs of $4.6m were incurred, made up of $500,000 legal fees, redundancies and restructuring costs of $2.5m and impairment of goodwill valued at $1.6m. EBIT was $2.9m, and once $5m of finance costs were factored in the net figure was a $2.1m loss.
Bernard Cassell, managing director of CPI says after a solid first six months, market conditions became more difficult as the year progressed, with the economic slowdown appearing to impact the printing industry harder than most. He says, “Paper pricing fell significantly in response to the rise in the Australian dollar and a fall in the price of pulp. At the same time, demand fell significantly as the economic slowdown took hold.”
Cassell’s outlook for print growth in the new financial year is far from rosy, he says, “The volume declines in 2008/09 are in excess of 20 per cent, with little if any evidence of a recovery in demand. The challenging environment was further exacerbated by the long lead times that prevail in this industry with the majority of the products coming from overseas suppliers.” CPI says it has responded to these conditions by accelerating its cost reduction programme, which was announced last year, and by minimising paper inventories.
The company concludes that the difficult trading conditions made capital and cash flow management difficult, however the reductions in inventories and receivables achieved in the second half enabled a positive cash flow of $11m to be generated. According to CPI, cost containment and reduction will also continue to be a major focus for the Group in the coming 12 months, as will its previously announced, warehouse rationalisation programme.
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