Us Blazes Trail For Paper Firm
The Age
Friday August 11, 2000
A surge in overseas earnings has lifted Spicers Paper's full-year profit by almost half, and the company hopes low capital costs will help it maintain double-digit growth in the current calender year.
The fine-paper merchant and stationer received a boost from its American operations, where a 10 per cent increase in revenues flowed through to a 32 per cent increase in earnings before interest and tax, to $18.7 million or 36 per cent of the group total.
Overall, Spicers' revenue grew 9.9 per cent to $1.3 billion while net profit rose 49per cent to $26.1 million.
Managing director Peter Waterworth said the result was no ``flash in the pan" thanks to long-running efforts to reduce costs and cut the company's interest bill.
``It's no more or less than the product of activities we've been undertaking for the last two or three years," he said.
Spicers said it had cut its gearing 31 per cent, and its net interest expense fell $2.9 million to $9.9 million.
As a result, Mr Waterworth said he hoped for profit ``growth in double digits". The company was not planning any acquisitions or developments on greenfield sites this financial year, he added.
In particular, Spicers was planning to maintain strong organic growth in the US. Last financial year, it made a substantial investment to upgrade its facilities and establish new distribution centres in Denver and Honolulu.
``It has the ability to do so because we have a lower market share in the western US than in New Zealand and Australia," Mr Waterworth said.
He said the company was expecting growth in all business units this financial year, with technology improving efficiency, costs and working capital well controlled and the supply situation stable, while demand and prices for paper were healthy.
The acquisition of Commonwealth Paper Company in May would add about $70 million to annual sales, and Mr Waterworth said it was already contributing to profits in its first month.
Earnings from Asia stood out in the results as sales revenue increased 25 per cent, helping to quadruple profit before interest and tax. However, even at $3.5 million, Mr Waterworth noted that it was still less than 7 per cent of EBIT.
``As a percentage of the overall business it's pretty small."
Mr Waterworth said he was pleased with local growth, considering Spicers' large market share in the Australian and New Zealand markets. Paper distribution EBIT across both markets rose 25 per cent, and stationery gained 15 per cent, putting it ``on track towards achieving a satisfactory return on investment over the next 18 months".
Overall EBIT in Australia rose just 12 per cent, however, as the result for the local market also incorporated Spicers' corporate costs.
SPICERS PAPER FULL YEAR 2000 1999 ($m) Revenue 1.3 1.2 Other rev 0.0 0.0 EBITDA 60.6 50.7 Depreciation 8.9 10.1 Interest 9.9 12.8 Pre-tax profit 41.8 27.8 Abnormals 0.0 0.0 Tax (15.7) (10.2) Minorities 0.0 0.0 Net Profit 26.1 17.5 Final div c (30/8) 5.0 4.5 Int div c 5.0 4.5 EPS 18.9 12.7
© 2000 The Age