The company purchased a currency option in December 2009 to hedge the foreign exchange exposure of an intercompany loan. However, with the Australian dollar continuing to trade at around parity to the US dollar, Paperlinx now expects its bottom line to take a $17m hit.

“The option costing $18m (pre-tax) and covering the period to June 2012 was entered into following the closure of a cross-currency swap. After deducting the $18m cost of the option, $56m in cash was released and used to fund the closure of the company’s loss-making Tasmanian operations,” the company said.

“However, as a result of the strength of the [AUD] at December 2010, the non-cash impact of the option at December 2010 is expected to be a valuation loss of approximately A$23m pre-tax (A$17m post tax). As a result of this valuation loss, the statutory reported result for the six months to 31 December 2010 is expected to be a loss.”

Paperlinx will release its half-year results to the Australian Stock Exchange on 24 February. The company said it expected underlying earnings to be “meaningfully ahead of” 2009/10 levels.

The paper merchant used last month’s AGM to say it is focused on “regaining relevance”, after posting a $225m loss for the 2009/10 financial year and cutting chief executive Tom Park.

Paperlinx is currently trading at 47.5 cents on the ASX.

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