Paperlinx has placed its subsidiary in Belgium and Netherlands in administration, with fears more European businesses could follow, with the paper giant’s shares shooting up by 50 per cent after a four week suspension. The company’s shares rose 0.7 of a cent from 1.7 cents to 2.4 cents today, after resuming from a voluntary suspension since March 26. The paper merchant placed its subsidiary Benelux in administration as its financier ING, which agreed to fund the business until April 15, ended its support before Paperlinx could secure the sale of the business. Paperlinx continues to seek to pull out of its loss-making European field and is looking to progress the sales or realisations process of its subsidiaries in Austria, Czech Republic, Denmark, Germany, Ireland, Poland and Spain.
The company says the Australian and New Zealand arms of Paperlinx will remain unaffected by the European woes as they are ‘ringfenced’. Andy Preece, who was recently appointed CEO of Paperlinx, says it is ‘deeply regrettable that the company’s exhaustive efforts’ to secure the sale of Benelux was not fruitful, and given the ‘circumstances’ seeking administration was the only option. He says substantial ongoing operating losses due to declining revenues and falling profit margins from lowered demand for paper in the Benelux region was the catalyst that led to the end of the company. “Challenges in restructuring, the tightening of supplier payment terms following withdrawals of trade credit insurance and the flow on impact of the Paperlinx UK administration culminated in the directors of Paperlinx to take this action,” Preece says. He says when it became ‘clear that the business could not be sold’ the local directors had ‘no choice’ but to seek administration. Preece says, “We deeply regret the impact this will have on employees and all stakeholders of the Benelux operations in the Netherlands and Belgium,” he says. “We have been completely open and transparent about the problems in our European operations for some time but our many repeated attempts to restore profitability have failed.” He says the company over the past five financial years has invested ‘substantial funds’ into the restructuring of the European operations, particularly in the Benelux and the UK. “However it has unfortunately not been possible to affect a turnaround in performance. It is therefore no longer in the company’s best interest to continue funding significant restructuring initiatives in the region or to support ongoing trading losses,” Preece says.
Comment below to have your say on this story.
If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.
Sign up to the Sprinter newsletter