Commenting on the announcement made to the Australian Stock Exchange on August 22, PaperlinX managing director and CEO, Tom Park, says, “The 2006 results reflect a continuation of the challenging market conditions that have been seen over the past three years and have continued into the new financial year.
“In this difficult environment we are encouraged that the benefits of a number of our restructuring and development programmes began to flow to earnings in the second half of 2006. These programmes have involved investing capital and current earnings to improve returns for shareholders if current conditions persist, and to increase our leverage to any future improvements in the sector.
“At the half year results we detailed a range of strategic initiatives expected to deliver a sustainable net benefit to operating profit of over $100m per annum in 2009, building from a net benefit of over $35m in 2007. These commitments are on track, underpinned in 2007 by the successful acquisition of Cascades Merchanting (now called Spicers Canada) in Canada, (already exceeding our year three 15 per cent return target), and the closure of the Shoalhaven number 1 paper machine.
“We have now added two new initiatives to our list; PaperlinX Office and an outsourced Maryvale Wood yard. Both of these initiatives are expected to exceed target returns, with one-off costs in 2007 of around $12m.
“PaperlinX will continue to focus on identifying opportunities to improve our existing businesses to counter the input cost increases and currency impacts that were encountered in our manufacturing business over the past year and were unable to be passed on through pricing. These cost pressures continue into this financial year.
“Our solid operating cash flow of $260 million was supported by continued good performance on reducing our working capital.
“Our employees are to be commended for their commitment and enthusiasm to realise the full potential from the unique PaperlinX business model during this difficult stage in the paper cycle,” Park concludes.
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