PaperlinX says sayonara to Australian Paper

PaperlinX completes sale of Australian Paper to Nippon Paper Group while the future of its Tasmanian mills hangs in the balance.

The $600 million initial purchase price took place yesterday, reducing the company’s debt by $500 million. In addition to the sales proceeds, PaperlinX will share in an earn-out arrangement that allows it to participate in positive earnings growth of the divested operations over the next three years.

PaperlinX’s two Tasmanian mills located at Burnie and Wesley Vale were excluded from the sale. According to a company statement, a detailed review of these operations is expected to be complete by the end of this month. Potential outcomes of the review include retention of the existing business, partial closure, closure or sale.

Tom Park, managing director of PaperlinX, described the sale as “a complex transaction to undertake”, but he hopes that it has put the company in a better position for the future. “PaperlinX is now moving from a period where we have had high internal demand for capital for the completion of the pulp mill at Maryvale to a period where we expect to be able to further secure our future through tight working capital management and on-going debt,” he said.

Looking to PaperlinX’s future, management expect current business conditions to remain difficult, with weak economic conditions impacting sales volumes in all markets. Demand is expected to increase as economic activity improves, with the inventory replenishment cycle predicted to begin earlier.