I think that all the doomsday comments by HC posters are completely incorrect.
The announcement stated
“the profitable Spicers businesses in Australia, New Zealand and Asia are insulated from the financial liabilities of the UK businesses. In this region, PaperlinX’s primary focus will be to continue to develop its businesses beyond paper merchanting and into Sign & Display and Packaging.”
This is normal for many business to insulate one business from another, and I'm of the opinion that what has been done is the most sensible solution to a most complex problem.
“This has been a difficult decision for the local directors of the UK Group, but one that I believe is unavoidable given the circumstances,” said Mr Preece. “PaperlinX has strongly supported its UK operations for many years, but despite continued efforts and the investment of significant capital over recent years, it has not been possible to successfully restructure the UK Group.”
To keep pumping money into Europe and UK would have only put the rest of the company at risk, so this will be viewed by many as a smart move. I remember a few years ago Straits Resources SRQ had a gold project in Indonesia called Mt Munro, the mine was running at a loss and there were many disputes with locals. Straits Resources put the wholly owned subsidiary, PTIMK, into bankrupty.
“It is also important to note that PT IMK being declared bankrupt and placed in administration will have no impact on either the legal status or solvency of the remainder of the Straits group of companies.”
Paperlinx will do a similar thing by wiping their hands clean of the operations in Europe and UK, they won't get a dollar for the operations but also they will have no ongoing liabilities.
"However, the proceeds of a sale or realisation will benefit other European stakeholders."
As pathetictrader said, it is a sad day for the employees as they have worked hard in difficult conditions, the UK paper market will most likely improve now that a large player like Paperlinx has been taken out of the market.
Once this has all settled Paperlinx will be a much smaller company, at least it will be profitable, plus the lower AUD$ will also bring benefits as the price of imported materials become more expensive.
Its about time that Paperlinx management start thinking about their shareholders.
"PaperlinX will focus on ensuring that the Spicers merchant businesses in the ANZA region continue to develop their diversified offering and create a sustainable platform from which to increase shareholder value in coming years. "
SRS Price at posting:
1.7¢ Sentiment: Buy Disclosure: Held
