MAJOR BUSINESS
INITIATIVES
Update of Existing Initiatives
Many of the strategic initiatives we committed to previously are now complete or well in progress and adding value to the business.
Our strategic initiatives delivered $81 million incremental benefit in 2008 (over 2005). These initiatives are on target to return $125 million incremental benefit in 2009 (versus 2005), an increment of over $40 million from 2008.
| COMPLETED | |
|---|---|
| Upgrade of the number 1 paper machine at Maryvale Mill | Complete, in market. Pricing favourable |
| Closure of the number 1 and number 2 paper machine at Shoalhaven Mill | Complete |
| Spicers Canada acquisition | Complete, returns exceeding expectations |
| PaperlinX Office (Australia) | Complete, domestic copy paper share growth |
| European portfolio changes | Exit France, Sweden, Portugal, Finland Acquisition in Italy (exceeds expectations) |
| Warehouse integrations | Toronto, Barcelona, Australia |
| Maryvale wood yard outsourcing | Completed and transferred to Operator |
| ONGOING | |
| The Delivery Company (UK Logistics) | On track, 12 sites operational |
| Netherlands restructure | Exceeding expectations. Living Office now operational |
| European IT platform | On track, three units completed, two units in progress |
| Maryvale pulp mill upgrade | On track for targeted returns. Output and EBIT upside potential, though capital cost higher and benefits delayed |
| Growth of own brands | +3 per cent Europe, +7 per cent North America |
| Strategic sourcing alignment | Ongoing |
Additional Initiatives
To proactively address the impacts of weak markets and the delayed pulp mill upgrade benefits, these existing and additional initiatives are in place for 2009.
Continue to expand the contribution of non-paper activities at superior margins
- yoyo,™ a closed loop office paper recycling system, was recently launched in the UK and is rolling out in continental Europe
- Expand our Sign and Display platform
- Industrial Packaging acquisitions in the UK have exceeded plan
- Non-paper activities delivered 17 per cent of gross profit in 2008
Complete the remaining European property sales to fund restructuring charges
- We expect over $20 million profit with a bias to the first half of the year
A Profit Protection Plan has commenced, to deliver a $30 million expense saving and a fuel surcharge benefit in 2009 to mitigate fuel costs and market softness
- There is a focus on shared services and fuel surcharges and a hold on headcount and discretionary spend
These initiatives touch all parts of our business and show the benefits that can be achieved by following our clear and simple values and core operating principles.
Strategic Review Process
To ensure that the strategic advantages of our businesses are fully valued, a process is underway to identify potential investors for a share of or all of Australian Paper.
- Potential investors are currently performing due diligence, though there is no decision to sell at the time of writing
- In the event that an offer is made and accepted, it is probable that the long-term carrying value of the business may not be achieved at this low point in the business cycle, though ‘through cycle’ valuations support the carrying value
- We will evaluate offers in light of the overall value and the alternative uses of funds in the near and medium term