Revenue down and profits up for CPI

CPI brought in revenues of $156.5 million during the six months ending in December 2005, a sharp drop from the $174.5 million reported this time last year. While the company's profit before tax of $2.8 million represented a boost on the $2.1 million of the December 2004 half, the figure shows CPI is still struggling with margins of less than two per cent.

Bernard Cassell, managing director at CPI, claims the company continued to grapple with difficult trading conditions over the first six months of the financial year. Paper margins were placed under significant pressure, with a four percent boost in volumes offset by a four per cent fall in prices.

“The impact of lower selling prices was partially offset by the introduction of new product lines previously not offered by the Group,” says Cassell.

“The paper division remained profitable in the first half of the year, albeit at a lower level than last year, in some of the most difficult conditions the industry has seen.”

While low sales volumes in the machinery products division resulted in significant losses, CPI claims things will pick up when a number of large contracts are completed in the second half of the year.

“It is anticipated that the machinery division will post a positive profit contribution for the full year,” says Cassell.

The Group sold its Braeside property during the half-year, which has assisted it with its debt recovery efforts. Debt was brought down to $23.9 million from the June half-year result of $38 million. CPI continues to occupy the lease as a tenant, and insists no operational impact will occur as a result of the sale.

Cassell points to paper price rises as the salvation for CPI in the second half of the financial year. The company was the first cab off the rank with price increases at the beginning of 2006, and says that while it is still too early to tell if the prices will stick, the signs are encouraging.

“CPI was the only merchant to lift it's pricing for January and consequently suffered some loss of volume,” says Cassell. “Since then, other merchants have also increased prices although the overall effectiveness of the increase is still hard to judge.

“We expect the market to remain competitive in the coming six months, but we are hopeful that the period of irrational pricing will come to an end.”

CPI hints that more efficiency and cost-cutting measures may be on the cards for the company, with Cassell expressing his support for the benefits of industry rationalisation in a tough market environment.

“Given the improvements that have been made in the Group's balance sheet, any such opportunities will be explored as they arise,” says Cassell.