When revenues are falling this fast, it is impossible to cut costs or to diversify quickly enough to compensate. So the outlook IMHO is grim IMHO. It seems like there may be years of losses ahead and the "return to profit in FY14" seems unlikley IMHO...
If you carefully review the market and revenue disclosures and commentary in the company's own announcements over the past 12 to 18 months, and do the maths, a few key points emerge:
1. Revenues and volumes are consistently falling faster than the markets PPX operates in.
2. Paper revenues are probably worse than is being disclosed. If you do the maths to back out the packaging ("double digit growth") and sign & display (growth rate not revealed but guess 3 to 4%)segments, paper must be faling at around 13%, not the headline figure which is disclosed for overall revenue of around 10% constant currency (which even then is worse than market).
3. The growth in diversified revenues is a red herring in that it is nowhere near enough to fill the hole left by paper decline. Example 1, we are told packaging is growing "double digit", but it would need to be TRIPLE digit as it is only 6% of revenue in the first place, whilst the 83% piece (paper) is falling at around 13% (see explanation above). Example 2, reference to 3rd party logistics in last presentation - so how much revenue is there really? $1m, $10m, $50m ?? If it was significant, there would be a separate revenue disclosed. Example 3, reference to Purple Packaging in the last presentation. How big is revenue in this UK business? $25m, $50m?? I would guess something like that. But what we really need to know is what is happening to the $2.5 BILLION revenue stream that the company reported on so encouragingly at the recent NAPM conference (see previous post).
In short, you are being optimistic in IMHO in believing that the $2.5bn revenue is a basis for a transition to +ve trading. It is slipping through the company's fingers like sand, judging by the figures with some simple arithmetic applied...IMHO, DYOR, etc.
SRS Price at posting:
6.9¢ Sentiment: Sell Disclosure: Held
