CPI does it tough with annual results

While the full-year profit represented a $21.4 million improvement over the losses of the previous year, it remained a less than stellar result considering CPI racked up sales of $323.4 million during 2004/05 - itself a meagre improvement over last year's revenues of $322.9 million.

Bernard Cassell, managing director at CPI, concedes his company felt the impact of producers failing to pass the rising costs of paper production onto consumers. “Unfortunately the volume growth was offset by lower prices, resulting from the difficult market conditions and strong currency that remained over US$0.75 for much of the second half.”

Cashflow and capital was also adversely affected by a blowout in paper inventories during the second half of the financial year. While CPI ordered additional stock from suppliers to offset shipping delays during the latter part of 2004, the shortage 'unexpectedly and suddenly' evaporated during the second half, leading to an excess in paper stock.

Cassell claims that while debt levels and cashflow were both adversely affected by the excess stock, CPI is taking steps to resolve the issues. “The Group has reduced its forward ordering, and is aiming to reduce its inventories significantly by December 2005.”

Improvements in CPI's revenues are attributed to the closure of its flagging imaging division, as well as to a rise in contribution from the company's capital equipment business unit. While CPI managed to turn a profit with its paper division, the returns were still impacted sharply by the difficult industry conditions.

Cassell claims CPI is looking into possibilities for improving the company's performance over the coming financial year. “The group is committed to ongoing improvements in working capital and cost control improvements,” he says. “Much will depend on the external environment for paper, which is continuing to be very competitive.”