Tough Times ahead for PMP

PMP's acquisition of Times Printers leads to a drop in full-year earnings.

PMP announced a full-year EBT forecast of around $85 million for 2007-08, below the current market consensus of $90 million and less than the last financial year's result of $91.3 million.

Increased operating costs are behind the decline, according to PMP's CEO, Brian Evans. "Additional volume in the core printing business coupled with the integration of the Times acquisition will see higher operating costs in the second half," he said.

"Printing volumes would be above last year, and pricing would continue to be competitive for the remainder of the financial year."

The Times integration plan is still on schedule, though it will incur a relocation cost of $6 million. In addition to this, PMP one-off costs of $5 million for a non-cash write down of surplus assets.

Evans, however, remains optimistic that the benefits of the acquisition would be noticeable from July this year. "While the full year operating earnings is expected to be below last year, we remain on track to deliver our target net debt position of below $220m at 30 June 2008," he said.

He flagged a price fightback from the other web printers following PMP's assault on the market last year with its recently commissioned MAN Roland presses. In a sector where prices are keenly gauged PMP gained a large swathe of the catalogue market from its rivals. A looming price war fuelled by even newer equipment in Melbourne is likely to ensure all participants take a margin shave in the coming year.

In view of these sharktank pricing conditions the prospect of magazine company ACP setting up is own greenfield web press facility is regarded as an extraordinary wild card. PMP is one of ACP's largest suppliers and according to Evans negotiations are continuing. If the mooted new printing plant is only a negoiating tactic it may yet prove to be an effective one.