The $60m drop compares with a loss of $10.2m the year before. The company says its Australasian revenue dropped 10 per cent, largely due to a 15 per cent reduction in Australian volumes; while European revenue dropped 7 per cent reflecting severe macro economic pressures.
Commenting on the result, Toby Marchant, CEO of PaperlinX, says, “These results are very disappointing reflecting our exposure to the European economic crisis. We have made progress in reducing our cost base and will see benefits starting to flow from this in the second half and beyond.
“Our working capital is at record lows, but this is insufficient to offset volume and price pressure in the half.”
PaperlinX also reports that revenue for the period was $2.18bn, down from $2.43bn the year before due to weaker sales and the stronger Australian dollar which had a $121m negative translation impact
Volumes of 1.26 million tonnes were down from 1.37 million tonnes reflecting a further deterioration in demand in the company’s key markets, in particular Europe.
Moreover, operating costs were down 7.7 per cent due to lower costs and the stronger Australian dollar, while diversified revenue grew by 6.7 per cent and now represents 23.9 per cent of total gross margin.
Net debt of $214m increased from $172m at June 2011 and $200m at December 2010. The average net debt for the six months was higher. December and June are the low points in the annual debt cycle.
Coinciding with the financial report, PaperlinX has announced a significant restructuring programme, which it says will restore profitability to the Company in the medium term and provide a sustainable platform for long term growth through the repositioning of the business.
Marchant says, “We have been working on a robust plan to restore profitability. What we did not envisage was the sudden and severe reduction in paper volumes in Europe in the first half.
“However, the main components of the plan remain on track with the restructuring in the UK and Australia, announced in July 2011, mainly now largely complete and delivering results ahead of plan.”
The Board has endorsed the new restructuring programme that involves a significant cost reduction and simplification of the Continental European business, as well as a further reduction in “Corporate costs.”
Marchant adds, “In order to execute this new phase of our plan we need additional liquidity. We are addressing this through asset sales and other potential sources.”
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