PAPER
MANUFACTURING
PaperlinX’s Australian manufacturing business, Australian Paper, is the only paper manufacturing operation in the PaperlinX Group, and is Australia’s leading manufacturer of quality communication and packaging papers.
Australian Paper primarily services the Australian market directly and through sales to PaperlinX Merchanting operations, PaperlinX Office and PaperlinX Printing and Publishing Papers, other third-party merchants and packaging manufacturers.
Paper Manufacturing has channels to market, building off its Australian mills, so our local customers benefit from our expert manufacturing capabilities, our widely available product offering, our superior service, customer support, and our extensive and efficient supply lines.
Paper Manufacturing – Results
Earnings before interest and tax for Paper Manufacturing were $(1.9) million with underlying operating earnings of $8.2 million. Earnings were negatively impacted by higher input costs and currency, but benefited from some pricing, a positive mix, improved mill efficiencies and supply chain management.
Paper Manufacturing – Results
| Year June 2008 |
Year June 2007 |
||
|---|---|---|---|
| Communication paper sales volume | ’000 tonnes | 485 | 499 |
| Packaging paper sales volume | ’000 tonnes | 300 | 319 |
| Total sales volume | ’000 tonnes | 785 | 818 |
| Sales revenue | A$m | 973 | 1,016 |
| Underlying earnings before interest and tax | A$m | 8.2 | 20.8 |
| Reported earnings before interest and tax | A$m | (1.9) | 10.2 |
| Return on average funds employed | % | (0.2) | 1.1 |
- Overall sales volumes were impacted by the four shuts relating to the pulp mill upgrade and a corresponding reduction in export volumes. Domestic communication papers volumes were up, although overall volume declined due to reduced exports. Copy paper market share in Australia has shown encouraging growth, despite price differentials as customers recognise our superior value proposition.
- The Reflex® brand of copy paper recorded a 6.3 per cent volume growth and market share growth supported by recycled offerings, advertising and delivery against the overall ‘reliability’ positioning.
- In the face of cost and currency impacts, good progress has been made on operating efficiencies, supply chain management and positive mix management to contain the downward impact on underlying EBIT to only $12.6 million. Record production weeks from the Maryvale Mill were recorded post the May-June pulp mill shut.
- Higher pulp costs have continued to impact operating earnings, with the average price of hardwood pulp up 25 per cent in US dollars. Cost increases in US dollars have been mitigated to some extent by the stronger Australian dollar (up 16 per cent in Australian dollars). Pulp prices have remained high with further increases announced. Commodity input costs for all raw materials resulted in an increase of $7.2 million.
- Reported EBIT declined to $(1.9) million from $10.2 million. Underlying EBIT of $8.2 million was lower due to the combined impact of the stronger Australian dollar, higher pulp costs and weaker coated paper prices.
- The high Australian dollar continued to hold down pricing across most segments, though more particularly in coated woodfree and publication papers markets, with a net direct impact on EBIT from export earnings of $(21.6) million.
- Ongoing work on product and customer rationalisation saw shift reductions on three manufacturing units taking effect in the second half of the year. Restructuring charges associated with the shift reductions were booked in the first half.
- The ENVI™ range of carbon-neutral papers has received strong support since its launch earlier this year, offering Australian customers and corporates the first Australian made carbon-neutral paper certified by the Australian Government’s Department of Climate Change.
- Average working capital was 1 per cent lower than last year; however, the period end position for working capital to sales was adverse due to the timing of plant shuts.
- Four major shuts have now been completed for the Maryvale pulp mill project, with benefits being seen from the work completed. This will substantially simplify the final commissioning activities.