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PaperlinX aims to grow in packaging and sign & display, moves forward with restructuring of Deutsche Papier

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PaperlinX aims to grow in packaging and sign & display, moves forward with restructuring of Deutsche Papier

April 03, 2013 - 22:20

BRUSSELS, April 4, 2013 (PPI Europe) -After four and a half years of net losses and several restructuring programs and divestments, the global merchant PaperlinX is continuing its efforts to adapt to a changing market.

One part of those efforts involves a recent switch in strategy, specifically from country-based to product-based thinking, with a focus on the packaging, sign & display and commercial print divisions. This change will primarily target continental Europe.

"Our new thinking is that we would have more efficiency and also more success in sales if we [applied] a borderless [approach to our] thinking about our operations in continental Europe," CEO Dave Allen toldPPI Europe, explaining that this should bring increased efficiency both in terms of product range and logistics.

Packaging currently accounts for 6% of PaperlinX's sales and sign & display for 11%. The company expects to grow in both these areas, although it sees greater opportunities in packaging.

"The growth opportunities in sign & display are still positive, but the market has been negatively affected by the economic conditions in the retail sector," Allen said, adding: "Within sign & display, the display or retail [market] is difficult right now, signage is more buoyant and industrial plastics is a growth area for us."

On the packaging front, PaperlinX is expanding its business in many countries around the world and the company considers this an area where it can continue to grow organically. Last year, it bought Canterbury Packaging of Christchurch in New Zealand, a packaging distributor focused on the local consumables, hospitality, hygiene and safety sectors.

Acquisitions are not part of PaperlinX's core strategy for the packaging division, however, but Allen did not exclude them.

"Our strategy is to grow. Then we decide what the best way is to facilitate that growth. In New Zealand, because we did not have a packaging business, we decided that the right strategy was to buy a company and then use that as a basis for growth. But in other countries where we have started a packaging business successfully, we will grow organically," he said.

Commercial print remains key:Aside from packaging and sign & display, the remaining 83% of PaperlinX's sales come from commercial print and the retail, office and office reseller sectors, with commercial print accounting for the bulk of that.

"Commercial print is still our most important business and will remain our most important business," Allen said. "But clearly in that business we have to reduce costs at the fastest rate because it is a declining sector [...] whilst we increase resources in sign & display and in packaging."

PaperlinX has taken several steps to restructure the company in recent years. The latest initiatives include job cuts in the UK, Germany and Benelux, for example.

"We have announced some restructuring programs, we've done some already, we've announced more, and if the market continues to decline we will follow that in terms of our business structure. So it would not be correct to say that this is the end of the process. It's a continual process to rescale our business to the size of the market," Allen said.

Divesting certain businesses has been another strategy of PaperlinX. Last year, the firm sold its Italian arm Polyedra to Lecta, its US operations Spicers USA and Kelly Paper to Central National-Gottesman, its South African business Finwood Paper to local management and its units in Croatia, Hungary, Serbia, Slovakia and Slovenia to Europapier.

"All of that has given us the cash resources to fund our current business including all of the restructuring that we're currently doing," Allen said. At the moment, the company has "no plans and no need" to sell anything else, he added.

Restructuring underway in Germany:PaperlinX haslooked at whether to "fix or sell"its German business Deutsche Papier, but without taking any firm position on this yet, Allen said several weeks ago when presenting the company's financial results for the half-year ended in December.

"Our focus is primarily on fixing the business rather than selling it. Selling it is not an option we are pursuing currently. So our primary route in Germany is to fix the business by reducing costs and improving its sales performance," Allen said.

PaperlinX has started streamlining three key areas of Deutsche Papier: logistics, internal and external sales. Under the revamp of its logistics department, PaperlinX will start operations at its new central warehouse in Biebesheim, near Frankfurt. The company will launch activities there in April and the transfer of existing operations to the new warehouse will take a couple of months, Allen expected.

As the Biebesheim warehouse begins operating, PaperlinX will transfer out of the two warehouses it already has in that area in Bensheim and Darmstadt. "But we will still keep logistics in the different parts of the country as forward logistics centers for our sales operation," Allen added.

PaperlinX will also establish a new internet-based phone system within Deutsche Papier which will allow it to act in a more efficient and productive way across its sales branch network, Allen said. "In other words, we'll be able to handle calls from customers easily not only in a branch, but between branches."

The restructuring in Germany will lead to job cuts, but Allen said he did not expect to have any precise figure for how many positions will be eliminated before the company firms up its budget for its next fiscal year, which starts in July.

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