The paper merchanting group informed staff at its Nottingham, Sheffield and Leeds distribution centres just before Christmas that the sites were earmarked for closure, with their workload moved to other sites in the merchant's logistics network.
“The important thing is that we will still be able to maintain the same level of service, but it’s matter of pulling costs out of the business and reducing our stocking points while still maintaining customer service,” said Paperlinx chief executive Andrew Price.
He added that the closures were unrelated to the partnership with DHL that was announced last year, which he said was “still evolving, but with no firm commitments at this point”.
According to the company, the closures, combined with a move to a centralised IT platform, will reduce its UK headcount by 65 in the first half of 2014, with affected employees understood to be subject to 60-day consultation.
The move was announced on 23 December and also includes a restructuring of its German operation that will result in 75 job cuts and an undisclosed number of warehouses and sales offices being consolidated into its main German logistic centre in Biebesheim.
“Unfortunately, the [affected] UK sites had been losing money for some time so we’re proposing to close those, and then in Germany we’re doing the same thing in the north, where we’re just not strong,” said Price.
“It’s affecting a lot of people and its incredibly sad, but the market is really tough and we have to make difficult decisions when sites continue to lose money. And as we move to a more regionalised model, we have to focus on the regions we need to invest in.”
In the statement released on the 23 December, the company said that while trading conditions in October and November were weaker than internally anticipated, the proposed cost savings and “improved pricing” in Europe would help to improve margins and return the business to underlying EBIT result for 2013/2014.
“I think we’ve seen an end to the downward price pressure and the first half of 2014 will see increases from mills, we’ve already informed the UK market of increases in February and March and we’ve already got suppliers talking to us about further increases in April or May,” said Price.
“There’s been so much capacity come out of the market, that the industry is moving to a different dynamic.”
The increases vary by category, but according to Price the first round of UK increases will be between 7%-13% depending on grade.
Separately, it has emerged that former Heidelberg Australia & New Zealand managing director Andy Vels Jensen, who joined Paperlinx as a consultant in September, has become UK and Ireland interim managing director.
Vels Jensen moved back to his native Denmark following his departure from Heidelberg and, according to Price, will commute weekly to the UK following his appointment.
“Andy had been doing some work for us on a special project after he returned to Europe, essentially market development research and he delivered his report, which was excellent, to the board in December. So we discussed an interim role, initially for three months, heading up the UK business,” said Price.
Vels Jensen officially takes up his new role today (6 January).
