Paper giant Paperlinx is facing a tougher than expected turnaround with strong performances in Australia offset by further losses in Europe and the weak Australian dollar.
According to its half year report, released today, the company is making some progress, with revenue up two per cent to $1.48bn and losses only half as bad as last year at $28.4m, but net debt rose 28 per cent to $177m thanks to trading losses, $9.1m in restructuring costs, and a weaker Australian dollar.
EBITA losses were also 36 per cent better than last year at $9.6m, while a $30m negative operating cash flow was also blamed on trading losses and restructuring costs, but was 51 per cent better than last year.
Chief executive Andrew Price says the turnaround strategy is progressing with improvements in all regions following restructuring efforts.
“Trading conditions remain challenging but we are moving ahead with our aggressive costs out strategy and developing a Year 2020 vision that will redefine our merchant model and deliver a sustainable pathway to profitability,” he says.
Paperlinx sold off its operations in South Africa, Slovenia, Slovakia, Serbia, Hungary and Croatia in the 2013 financial year.
Australian operations helped save the company from worse results, with revenue for Australia, New Zealand and Asia up 1.37 per cent to $221.4m and EBITA up to $9.2m from $7.6m despite tough trading conditions.
The company says it is expanding its e-commerce platform and investing in its packaging and sign and display business in the region while cutting costs and closing some properties through lease renegotiations.
Paperlinx is aggressively pursuing diversified business opportunities like packaging materials and pre-made cartons, boxes, trays, and sign and display, revenues for which are up 20.9 per cent (6.4 per cent in constant currency), and now make up about 20 per cent of total sales.
The company expects the next half-year to be profitable, but not enough to overcome the current EBITA deficit. It is expecting an EBITA loss of $5m-8m for the full 2014 financial year.
Paperlinx is also laying down an ultimatum to its hybrid SPS Trust shareholders, who have been in conflict with the company since its huge share price rout of the past five or more years, demanding they accept a buyout off of 250 ordinary Paperlinx shares per SPS unit that closes February 28.
“The Paperlinx board believes the offer is attractive, given the relative market value of SPS units and Paperlinx shares,” the company says.
“The board is encouraging unitholders to accept the offer as it won’t be increased or extended.”
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