The decision to exit follows a comprehensive ten month review of its Tasmanian and Burnie paper manufacturing operations, which came after the sale of its other Australian paper manufacturing activities to Nippon Paper, and is expected to cost PaperlinX $120m if no buyer is found for Burnie.
PaperlinX says all approvals needed for this decision have been granted. Some 250 jobs wil go in the first phase, with a further 170 dependent on the sale of Burnie.
On completion of this exit, PaperlinX will be solely a merchanting company, with businesses distributing paper, sign and display and graphics materials and industrial packaging to a wide range of customers in Australia, New Zealand and Asia, Europe and North America. It is Australia’s biggest paper merchanting operation, selling through Spicers and Daltons to the commercial markets, and through iMedia to the wide format sector.
The exit will occur in two stages, with the first expected to be completed by the end of March 2010, and the second expected to be completed by the end of June 2010. In the event that both sites are ultimately closed in full, the overall net cash cost is expected to be around $10-20m. The total cash closure costs before recovery of working capital and the sale of assets would be around $120m including redundancies and environmental remediation costs over the full course of the exit.
It is expected that the 2010 result for PaperlinX will include after tax significant items of around $170m including non-cash accounting items as a result of the closure. Tas Paper results will be reported under Discontinued Operations for the 2010 financial year.
Commenting on this decision, Tom Park, managing director PaperlinX, says, “While this was a difficult decision to make, it provides greater certainty for all of our stakeholders and removes one of the key uncertainties that has been overhanging the company and its employees. To reach this point has been a complex exercise and we will now work to conclude this process expeditiously in the interests of all parties.”
“Throughout this process we have received strong support from our Tasmanian employees, even in the face of this great uncertainty. I would like to thank them for their efforts whilst we have pursued the full range of options for these operations. Thank you also to our customers, suppliers and all levels of Government who have worked closely with our team throughout the review process.”
“From a PaperlinX perspective, we are pleased to have been able to significantly reduce the net cost of our exit from Tasmania from the initial estimates,” adds Park. “It is unfortunate that it was not possible to create a scenario where the Tas Paper business could be sustainable over the long term, but a more positive outcome for the Burnie Mill will depend upon the outcome of current discussions with a potential purchaser and the level of support any new owner receives from the wider community.”
“The operations at Burnie and Wesley Vale are together currently substantially loss making and this level of loss, exacerbated by the current high Australian exchange rate and business configuration, is unsustainable.”
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