PMP does its dough with decommission bungle

Chief executive David Kirk claims the problem is related to PMP's decision to install new presses across Australia, his comments implying that recent presses decommissionings have left the company at a disadvantage. “PMP is undertaking major restructuring of the capital base in the print business. This has reduced capacity more than we previously expected,” Kirk says.

“We are simply not able to process the work in the six-month period we had previously forecast. In addition, we continue to see lower gross margins in print as a result of a higher share of contracted magazine and major retail work and less capacity available to produce higher margin spot work.”

The company is locked in to produce low margin magazine work for the major publishers, such as Kerry Stokes’ Pacific Magazines, foregoing the high value spot market for catalogues.

Kirk insists however that the company's frustrations will be resolved before the year is complete. “While it is frustrating and disappointing to deliver lower earnings than previously expected in this six-month period, PMP is renewing the printing press fleet and bindery equipment with new state of the art equipment and we had to do this in the seasonally quieter months of the year,” he says. “When the equipment is installed we will achieve significant operating cost benefits and have new capacity available to sell in the busy Christmas period.”

With the announcement of lower results the sharemarket punished the company by wiping 25 per cent from its share price. PMP's share price hit an all-time high of $2.35 earlier this year, but last week saw it plummet to levels as low as $1.20. The catalyst for the shake-up was the revelation to the Australian Stock Exchange that 2004-05 earnings would come in between $70 million and $72 million, revised down from its previous forecast of $84 to $90 million.

The revision brought back to mind the troubled years of Bob Muscatt’s reign when the share price dipped below 50 cents.

PMP is currently undertaking one of Australia's largest ever press installation programmes. www.PMP.com