PaperlinX announces 'significant' loss in 2012 full year results

Today (22nd August 2012), PaperlinX Limited has announced a statutory loss after tax of $(266.7)* million for the year ended 30 June 2012 compared to a loss of $(108.0) million for the prior corresponding period (pcp).

This statutory loss is significantly increased from the $171 million expected loss announced on 26th June 2012, primarily due to the Board’s decision to write-off all remaining goodwill on its European operations.

The key features of this result are:

• Revenue was $4.11 billion, down from $4.67 billion for pcp due to weaker sales and negative translation impact arising from the strength of the Australian dollar.
• Diversified revenue grew by 3.4% (constant FX) over pcp.
• Volumes of 2.44 million tonnes, down from 2.63 million tonnes for pcp reflecting a further deterioration in demand in our key markets, in particular Europe.
• Restructuring costs of $(31.1) million pre-tax in line with plans announced in June.
• Negative operating cash flow of $(62) million was unfavourable to $55 million for pcp following deterioration in trading results and adverse working capital movements.
• Impairment of goodwill and other non-current assets of $(125.9) million after tax, primarily in the Benelux and the UK.
• After tax loss on the sale of businesses in US and Italy of $(62.4) million.
• Currency option close-out, generated $39 million in cash.
• Lower net debt of $148 million vs. prior year of $172 million primarily reflects the repayment of debt, proceeds from the currency option, the stronger Australian dollar, partly offset by negative operating cashflow.

The Strategic Review resulted in:

• The sale of businesses in the US and Italy and both sales have now been closed. In addition, the sale of our businesses in South Eastern Europe and South Africa are expected to complete in the first half of FY13. Total net cash proceeds from these disposals are expected to be approximately $90 million.
• Extensive restructuring in the UK, Australia and Corporate. In June 2012, we announced the restructuring programme would be significantly expanded particularly in Europe, and the programme is now expected to generate ongoing benefits of $73 million p.a. by the end of FY14 for a total cost of $45 million.

Following the disposals described above, the Group now comprises ANZA, where continuing underlying EBIT of $10.9 million was slightly down from $11.4 million pcp, Canada, where continuing underlying EBIT was positive at US$8.4 million vs. US$6.0 million pcp and Europe, where continuing underlying EBIT was a loss of €(17.8) million vs. a profit of €2.5 million pcp.

Commenting on the result, PaperlinX Chairman, Harry Boon says “These results reflect a company in transition as we respond to the reality of the continuing structural decline in paper demand, current weak market conditions and the continuing poor outlook in Europe. The implementation of the Strategic Review involved taking substantial measures to reshape the Company. Cash generated from asset disposals and the close out of the currency option have provided much needed liquidity, reduced debt and funded crucial restructuring. When completed, the expanded and accelerated restructuring programme will provide a significantly lower operating cost base.”

Dave Allen, Interim Chief Executive Officer, adds, “While we have made significant progress over the year to transform PaperlinX, there is still much work to be done to return the Company to operating profitability. In the short term, my priority is to implement the strategy set by the Board to execute the restructuring plan and drive the growth and margin of our diversified products, particularly packaging. Our remaining businesses have significant positions in sizable markets, and with a lower cost base, we are now better positioned to become a successful broad based material supplier.”

For more information, please visit www.paperlinx.com

*unless indicated otherwise, all figures given are in Australian dollars