Paperlinx’s new chief Andy Preece has a lot of work ahead of him after the company’s first-half FY15 report shows the company lost the equivalent of almost $4m a week, due to asset writedowns and plunging European sales. The paper merchant has more than tripled its losses to $90.8m in the first-half of FY15, on a revenue slump of 12 per cent to $1.3bn, total EBIT losses of $81.2m and its net debt rising 68 per cent to $157.6m.
Andy Preece new CEO of Paperlinx
The report shows a worsening climate for Paperlinx compared to the same period in 2014 where losses were halved, EBITA losses were 36 per cent better and revenue edged up two per cent. Under Andrew Price’s leadership the company looked to be turning around as it made more gains in the second half of the last year heading for profit. However, this report shows that to be a fading dream. The company’s sales in Europe continued its downward trend falling 15 per cent to $884m, pre-tax losses were up 94 per cent to $50.7m, and EBIT losses were 14 per cent to $21.35m. The company says sales slump was ‘significantly more’ than expected in the second quarter, which Paperlinx blames on some major mills starting to sell directly to customers at what is says are unsustainably low prices. Paperlinx says, “European mills and merchants [are] now competing for the same business and price cutting to win customers.” The report further fuels the company’s chairperson Robert Kaye’s remarks, when the board appointed Andy Preece as CEO, that the company is considering selling off its European arm. Kaye says, “As we continue to evaluate all strategic options as part of the recently commenced strategic review, including the potential sale or restructure of part or all of the European operations and with the pending sale of Spicers Canada, now is an appropriate time to make this leadership change.” Spicers, a subsidiary of Paperlinx in the Asia Pacific recorded a six per cent sales drop to $209m, which was offset by margin and cost control in Australia and New Zealand. The company’s EBIT eased just one per cent to $90.1m, and while pre-tax profit was down 85 per cent to $1.35m, this was mostly a result of $7.77m worth of significant items, up from $412,000 in 2014 including $1m restructuring cost and a $6.3m goodwill rightdown. It was also not great news for Asia as it continued to slow after the commercial print market begun contracting like Australia, and similar margin-improving measures are planned to be implemented there. Spicers Canada also held its head above water, with revenue drop of one per cent to $205.2m, EBIT up four per cent to $7.5m, and pre-tax profit would have been up slightly if it wasn’t for the $31.7m goodwill impairment, which forced it into the red.
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