While the print giant’s sales revenue for July 1 to Dec 31 2008 was up slightly to $713m from $702m the previous year, earnings before interest and tax were $33.5m compared with $48.1m the year before, highlighting the razor thin margins in the volume heatset business, which had PMP printing more work for lower returns.PMP printed some 193,000 tonnes of work in the siux months.
Graham Reaney, PMP chairman says this was a disappointing result especially given the investment made over the past few years in the core print business. He says the drop is largely due to inefficiencies in the print business, combined with lower average selling prices and higher labour costs
Meanwhile, Richard Allely, PMP acting CEO says in the first half, the company’s core printing business performed well below expectations. He says, “While the company was successful in generating additional volumes, it did so at reduced prices. Moreover, the business failed to manage the additional complexity efficiently, which lead to increased costs. As a result, print revenue was down slightly to $377.6m, with EBIT down 30 per cent to $27m.”
PMP expects its contract print volumes to decline in the next six months, and spot prices to be cut-throat, however it believes its cost cutting and rationalisaiton plans will deliver a second half EBIT roughly in line with the first.
Alley says that a review of print operations has led to a network optimisation plan that will help the business deal with these issues and combat price pressure arising from excess capacity in the market. He says, “Our print optimisation plan is currently being implemented and will deliver cost reduction and revenue optimisation benefits in the second half.”
The company says the optimisation plan involves a number of key initiatives including the previously announced closure of two presses resulting in 76 redundancies. This will result in non-cash plant write down and redundancy costs in the second half of approximately $2.5m and $4.8m respectively.
PMP’s net debt was rose by $48.5m to $248.1 million at the end of December 2008, up from $199.6 million six months earlier. Net debt to equity stood at 65.9 percent, up from 50.5 percent. The increase in net debt was due to the increase in inventories as the company stocked up on paper for the Christmas retail catalogue work in order that it didn’t get left short. PMP expects its debt will return to the $200m marker as it works through this paperstock in the coming months.
Alley also outlined that the combination of falling consumer confidence, higher labour costs and strong competition, would make achieving growth challenging for the remainder of fiscal 2009.
He says, “While precise forecasts are difficult at this stage, subject to there being no further market deterioration, we expect the second half earnings to be at least as strong as the first half.”
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