By Jo Francis, Thursday 02 April 2015
Major merchants and mills are enacting contingency plans as they attempt to minimise disruption after yesterday’s abrupt shutdown of most of Paperlinx UK – although one senior paper executive has warned of a short-term “maelstrom” in the market.
Administrators from Deloitte were appointed to a number of Paperlinx UK operations yesterday afternoon (1 April), although the group’s packaging operations are not included. Almost 700 employees were immediately laid off.
As printers scrambled to source alternative supplies, merchants’ contingency plans have kicked in. All were unanimous in their concern for the affected Paperlinx employees.
Antalis is now the de facto biggest merchant in the UK. Managing director David Hunter told PrintWeek: “This is terribly sad news and we are all very conscious that there are lots of people today without a job.
“We have been thinking about this event for a long time now, and we made sure we had extra people to handle calls and extra capabilities in our warehouse. We have been building stocks.”
However, Hunter warned that credit lines would be an issue. “There’s going to be a shortage of credit on the customer side. We’re doing what we can but it’s not going to be easy. And we have a large group of established customers that we’ve got to look after first.”
Premier Paper group marketing director David Jones echoed Hunter’s sentiments about the human cost. “The first thing to say is our thoughts are with the people at Paperlinx who have lost their jobs,” he said.
“Short-term this will result in uncertainty in the market and will no doubt put a great deal of pressure on paper supplies in the coming weeks and months. Long-term we will adjust. We are working with mills to secure supplies and to ensure any potential disruption is kept to a minimum,” Jones added.
EBB chairman Tim Elliott said his company had also been making preparations: “It is very sad to see the failure of Paperlinx, particularly the number of job losses, but this news is not a surprise. At EBB we try to add value in the supply chain, and have accordingly been beefing up our stock, logistics and warehouses offer for some time.
“The UK print industry is a world leader in so many ways, and will always need a vibrant, profitable source of paper. We are ready!”
Denmaur managing director Mike Gee reported an immediate rush of orders for the Amadeus recycled grades from printers who had previously sourced Revive from Paperlinx. “It’s important for printers to have early dialogue with merchants on a commercial and financial basis,” he said. “This is going to make credit insurers even more nervous.”
The current situation is unprecedented. Informed estimates put the business previously supplied through Paperlinx as being worth between £30m-£40m a month.
One senior paper industry executive told PrintWeek: “This volume is not absorbable in one hit. There’s going to be an absolute maelstrom.”
The rump of the Paperlinx UK business continues to trade under the control of Deloitte while administrators look for a buyer for the business. In a letter to customers seen by PrintWeek, Deloitte states that future sales will be on 30-day payment terms.
Overnight, Paperlinx UK’s Australian parent issued a statement about the drastic action taken in the UK, which has sent a shockwave through the industry.
The group said its board had decided there was no way to salvage the UK business. “It was not in the best interests of Paperlinx to continue to support the UK’s trading losses and adverse liquidity position or to fund significant restructuring initiatives,” the firm said.
Chief executive Andy Preece, who was appointed just over a month ago, described it as a difficult but unavoidable situation. “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.”
Paperlinx’s A$2bn (£1.02bn) turnover European business lost €14.9m (£10.9m) at the EBITDA level at the half-year, which it blamed on its UK and Benelux operations. It also confirmed that its UK facility with invoice financier ING had been terminated.
Paperlinx is currently in talks with a potential buyer of its Benelux business, and ING has given Paperlinx 14 days to resolve the situation, otherwise the operation could face a similar fate to that of the UK.
The group also said that its Spicers operations in Australia, New Zealand and Asia were effectively ring-fenced from the problems in Europe.