One year on, what was the impact of Paperlinx’s collapse?
Monday, April 4, 2016
It was once the behemoth of paper merchanting with around 1,200 staff and almost 20 UK sites but 12 months ago, on, of all days, 1 April, the bulk of Paperlinx UK went into administration and the industry held its breath.
The company’s fall from grace created ripples felt across the industry – with suppliers, printers and, of course, the people who worked at them, winning or losing as a result.
Australian-owned Paperlinx UK was the country’s biggest merchanting group with, at one stage, more than 40% of the market share. But its troubles had been brewing for years. Sales were falling as fast as losses were mounting – in the second half of 2014 alone worldwide sales fell 12% to A$1.3bn (£659m) and losses ballooned to A$87.4m.
As a result, in December 2014, Paperlinx announced a strategic review that would look at “all options” including acquisitions, disposals and mergers. But Paperlinx had been restructuring for years and, in the end, the last throw of the dice was too little, too late.
Nevertheless, when the administration happened, its 700 immediate redundancies and 14 site closures came as a shock.
In the weeks and months that followed it created a domino effect that saw other print and paper businesses crumbling under the weight of their exposure to the merchant.
It wasn’t long before other suppliers moved into the space vacated by Paperlinx.
Premier Paper bought its reel paper operations on 20 April.
Shortly after that, Paperlinx’s wide-format kit and substrate division Visual Technology Solutions was rescued from administration by Vink Holdings and now trades as Europoint. Then on 6 May, Antalis, now the UK’s largest merchant, bought Paperlinx UK’s packaging businesses.
Aims Group company Warren Board also grew as a result of Paperlinx’s demise, briefly gaining exclusive merchanting rights for Stora Enso’s Lumi stock for two months before Premier Paper was also appointed as a seller.
Stora Enso was one of the few manufacturers that pre-empted the collapse of Paperlinx, having had made the decision to sell direct to the market in 2014.
“It was partly the problems they were having and partly the problems we were having with them,” says Mario di Lieto, Stora Enso director UK and Ireland.
“On the day they went bust we had already been offering paper directly to printers for nearly a year.
“We were in a surprisingly robust position. Once Paperlinx went, people realised that our offering to market was viable and met their needs.
“The general view was that the market previously was oversupplied. The Paperlinx demise, unfortunately for those employed by it, resolved part of that situation almost immediately. We offered a brand new line of credit that hadn’t been available to the market as a whole.”
Di Lieto’s view on the market is echoed by Warren commercial director John Turner: “I think if you look at the established names in the market, Antalis, Elliott Baxter and Premier have all done well. We’ve seen these companies increase their warehousing and logistics. Not only have our sales doubled but our stockholding has doubled to keep up with demand. There’s been a pressure on logistics, you hear of some merchants with bulging warehouses, it’s put real pressure on them.”
But it was a nice problem to have for many.
Scottish mill, Tullis Russell Papermakers, was not so lucky. The company, which had been making paper in Markinch, Fife, since 1809 was probably the highest-profile victim of the Paperlinx collapse. Its exposure to Paperlinx proved its undoing.
No buyer was found for the mill, although some of the firm’s intellectual property was snapped up and some brands remain.
The dust has still not fully settled at Europoint either. In November former managing director Frank Moran said the company was looking forward to a bright future after a “rollercoaster” six months, moving into a new building and adding new warehousing.
Moran has since departed and the business is “just coming through a fundamental restructure,” according to Northampton centre manager David Foreman.
“This has been a painful, but necessary, process to allow us to better serve our many loyal customers. It also strengthens our ability to regain our market position in many of the sectors we were traditionally known in,” he adds.
While Europoint gets fit for the future, it’s been full steam ahead for competitor Papergraphics; another company that benefitted from taking on experienced Paperlinx staff.
“We took most of their hardware and colour management crew – six people. It was the catalyst to get us into hardware sales, and now we’ve acquired CWE. It turned out to be incredibly successful,” says chief executive John Selby.
“The colour management guys are very experienced, they are Onyx RIP specialists. It’s turned out very well. They are a lovely bunch of people as well.”
For printers, it was thought the wider effect of a Paperlinx withdrawal would be severe with a senior source at one major merchanting group telling PrintWeek a month prior to the Paperlinx collapse that the “disruption would be incredible”. There were fears of price rises, supply problems and most of all, an unsustainable dent in the ability of printers to get credit, with the loss of the Robert Horne and Howard Smith credit lines.
“I think there was a lot of expectations that it was going to cause a lot of disruption. I think in a lot of ways it stabilised the market,” says Selby.
Stora Enso’s di Lieto agrees: “I was one of the naysayers who thought there would be a big credit issue but that didn’t really happen. I was surprised by that and in many ways I’m quite happy to admit that.”
Of course printers did have problems – some quite big ones.
Digital Print Zone owner Ali Buckman decided to put his business into liquidation a matter of days before it would have become insolvent, after being hit with the double whammy of Paperlinx UK operations going into administration and the unexpected withdrawal of an investor.
Welsh litho printer Dobson & Crowther, also cited the administration of most parts of Paperlinx UK, its largest supplier, as the main reason for its demise.
Compass Business Finance was one finance company called on by printers for help.
“The Paperlinx administration clearly had an effect on the industry, just not to the extent that was originally perceived as companies found other paper suppliers were prepared to extend their facilities to fill the vacuum,” says director Jamie Nelson.
And that seems to be the lasting Paperlinx legacy: it was thought to be too big too fail and if it did the effect would be horrific, in the end neither was true – because the merchanting industry proved to be greater than the sum of it parts.
How did the collapse of Paperlinx UK affect you?
Peter Birbeck, managing director, Calderprint
“We have lines open with every merchant and when Paperlinx went under I ordered something like 100 tonnes of Lumi direct from the mill just to make sure that it didn’t affect us. I think the other merchants are a lot more strict in the terms they give people. You have to be more careful who you deal with, we certainly chase our money quicker. We deal with print management companies and those that pay you the worst, all of those 90 day-plus people, we walked away from. I think everything settled down quite quickly in the end.”
Anthony Cockcroft, group managing director, White Ghost Group
“I would suspect with the calibre of people employed, the initial impact would have been a great shock, but many will have secured new employment in and out of the industry. The greater and more long-term pain, would be served by the long-standing employees who have lost out on their retirement security by the huge pension deficit. Long term, material pricing is still competitive between the paper merchants and as ever, it pays to shop around and credit control from the larger paper companies has always been very stringent.”
Mark Farrimond, chief executive, The Envelope Works Group
“I think at the time it had a massive impact on the market. I think everything has settled down now. At the time we didn’t buy paper but the people we were buying from were heavily reliant on Paperlinx. A lot of printers were allowed to run up big credit lines and a lot of printers now have to pay a lot more. It’s made the remaining merchants more cautious about credit lines and I think there’s been a bit of cherry picking going on, the merchants that are left have picked up the printers they want and some of the other printers were left stranded. It all appears to have settled down.”
2000 Demerges from Amcor, lists on Australian Stock Exchange
2001 Acquires Spicers Paper, with operations in Australia, New Zealand, Asia and the US. Acquires Canada’s Coast Paper
2002 Acquires Canada’s Papier Turgeon, then Bunzl Fine Paper, subsequently renamed The Paper Company
2003 Acquires Buhrmann’s paper merchanting division, which includes Howard Smith, Robert Horne and M6 Paper. Renamed Paperlinx Europe. European Commission approves the deal
2009 Sells Australian Paper to Nippon Paper. Remaining mills become Tas Paper and are subsequently closed
2012 Now solely a merchanting business. Sells businesses in the US, Italy, South Africa and across Europe. 370 jobs go in Europe, 200 of them in the UK. Dissident shareholder Andrew Price appointed non-exec director
2013 Price becomes chief executive
2014 Paperlinx announces strategic review to look at acquisitions, disposals and mergers to cope with European markets “in pretty serious decline”. Losses treble in first half to A$87.4m
2015 February Price axed. Sells Spicers Canada. Tries to sell European operations
March Trading in Paperlinx shares suspended due to possible breach of covenants. GF Smith pulls its range
April Administrators take charge of most of UK operation, lay off 700 staff with immediate effect. Premier Paper buys Paperlinx’s UK reel paper operations from administrators. Papergraphics moves into the hardware and software markets after taking on Jetrix and Canon machines in the UK. Wide-format kit and substrate business VTS acquired by Vink Holdings and now trades as Europoint. Paperlinx’s Austrian and Benelux operations placed in administration
May Aims Group becomes Lumi stockiest. Antalis buys Paperlinx UK’s packaging businesses. Paperlinx Poland sold
June It emerged that Paperlinx UK owed creditors almost £53m, had a pension deficit of £180m, and owed HMRC nearly £10m. Paperlinx’s former chief executive Andrew Price named chief executive of Asia Pacific for HH Global. Paperlinx sells its Irish, Spanish and Scandinavian operations.
August Paperlinx posts losses of A$392.3m (£183m)
October Paperlinx completes European withdrawal as Paperlinx Deutschland falls into administration. Denmaur signs deal with Stora Enso and buys intellectual property rights of the Revive brand from the Paperlinx administrators. Paperlinx shareholders vote to rename the company Spicers.
November Unsecured creditors of Paperlinx UK still unsure if they will receive pay-outs six months after administration
December Carbon Balanced Paper, formerly a Paperlinx scheme, relaunches in the UK