Horror year set to continue to PaperlinX

Global drop in demand for paper shows no signs of picking up for merchant and manufacturer, PaperlinX.

In its 2009 full-year result, sales revenue was down five per cent at $7,106.6million, while earnings experienced a major decline at $93.6million, 63 per cent down on the $254.3million figure for 2008.

According to PaperlinX CEO, Tom Park, there has been an unprecedented deterioration in the demand for paper globally which reduced volumes by 15 to 20 per cent in the second half of the year.

“The difficult conditions that began to impact in the first half of the 2009 financial year accelerated throughout the second half, with volume declines overwhelming the many positive actions that were completed to support the company results,” he said.

Park added that the depressed results, compounded by foreign exchange losses in the first half and expected property sales not completed by 31 December 2008 caused the company to breach banking covenants, leading to lender fees and advisor charges.

The sale of Australian Paper earlier this year is expected tor educe debt and contribute to a lower cost base next year, along with a world-wide headcount reduction of 632 people and freeze on management salaries and board fees.

Despite these plans, Park is yet to see an upturn in consumer confidence or economic sentiment and expects rough sailing well into next year.

“The first half of 2010 will remain tough, coming of a week second half of 2009, it will see the net benefits from cost reductions already made,” he said. “The improving consumer and economic sentiment seen in our major markets has yet to be reflected in a lift in demand in these markets.”