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INVESTORS in Australian paper company PaperlinX have
had an ear-popping ride.One night in late April shareholders went to bed
safe’n’snug with the share price at $3.82. Next morning it opened at $2.81.
What happened was an earnings warning. The CEO put out a statement saying the
company expected it wouldn’t meet this year’s target, and wouldn’t even equal
last year’s numbers.
What was going on?
Paper is a tough global business says PaperlinX general manager corporate
affairs David Shirer.
In the paper industry there are manufacturers who make paper, merchants who
sell it, and printers and retailers who actually buy it.
Really big printers, such as newspaper and magazine publishers buy direct
from the manufacturers. All the rest buy through the merchants.
PaperlinX is a manufacturer and a merchant. The manufacturer, Australian
Paper Manufacturers, is Australia’s only local paper manufacturer and supplies
about 30 per cent of the Australian market. The remaining 70 per cent is made up
of imports.
Australian Paper Manufacturers is being crunched.
Paper is traded globally in US dollars.
The high Aussie currency means imported paper is cheap, meaning the local
paper is harder to sell. The company owns Reflex, a trusted high quality brand,
so it can compete against cheaper imports. But it is tough going.
Shirer paints a picture; profit last year from the photocopy paper business
was around $50 million. Two years earlier profit was $135 million. PaperlinX’s
other business is a paper merchant. It’s a global business.
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