A critical paper shortage has been listed as a key cause for Ovato’s decision to immediately close its New Zealand heatset operation but CEO James Hannan says supply and demand for Australian heatset production remains aligned.

Ovato announced this week that it would be closing its heatset printing facility at Wiri, Auckland effective immediately with 100 employees to lose their jobs.

Over the last two years Ovato has undergone significant restructuring and transformation as it move back to its roots of having a laser focus just on print. This transformation was headlined by a complex NSW Supreme Court approved restructure and recapitalisation plan which resulted in the closure of Ovato’s print factory in Melbourne. It also sold its retail distribution business in Australia & New Zealand to client and magazine publisher, Are Media, and totally closed its residential distribution arm.

Critical global paper shortages are severely impacting heatset catalogue and newspaper printing and the situation was made worse in New Zealand after Norske Skog shut down its paper mill at Kawerau mill last year.

Commercial printers without guaranteed supply contracts have faced tough challenges finding newsprint elsewhere.

This latest announcement from Ovato comes after it closed its Christchurch plant in September 2021. The company will now only keep a smaller sheetfed production line running in Auckland.

Ovato CEO James Hannan told Sprinter all affected employees in New Zealand “will be paid the redundancy entitlements prescribed in their relevant employment agreement as well as any accrued leave”.

He added paper supply for Ovato’s Australian operations is currently aligned with demand.

“Volumes are re-stabilising as we emerge from the latest COVID surge and the raft of natural disasters we have faced since January, so supply and demand are fairly well aligned as we stand here today,” Hannan told Sprinter.

“That being said, more volume is always nice to have, and our sales teams are working hard to bring in work.”

Hannan acknowledged the current operating conditions are difficult in regards to paper supply, saying: “It is certainly still a struggle getting the surety of supply that we require, but we are working with clients to move them to available options. We have a few more options available to us in Australia.

“We look forward to returning to a robust supply chain as the months go by. Pricing pressure remains across all raw materials due to the macro-economic conditions, but we are hopeful that they will stabilize as time goes by.

“Print remains such an important marketing channel for so many Australian companies and we remain focused on ensuring we deliver them a top-quality product.”

Paul Gardiner, managing director for Ovato New Zealand, said the decision to shutdown the company’s heatset operation in New Zealand was not made lightly.

“We simply cannot run a sustainable heatset business without paper,” he said.

“This is a devastating blow for our committed clients, many of whom we have partnered with over several years championing the ‘power of print’ through marketing plans.”

About 60 per cent of those losing their jobs are E tū members.

Site delegate Owen Sinclair says affected workers were shocked.

“Some have worked here for 20-30 years. People are now going to have to work through what their entitlements are and when they’re going to finish,” he said.

Joe Gallagher, negotiation specialist at E tū, says the closure was an example of the effect of ruptured supply chains. He says, “When a key player in Ovato’s supply chain, the Kawerau paper mill, closed, this left the company reliant on imported paper.

“Importing paper is not only expensive due to the huge increase in shipping costs, but there’s around a seven-month wait time to get paper from Europe.”

He also mentioned the impact of COVID-19, saying companies face the risk that the price of what they’re shipping can increase again while in transit.

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