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paperlinx profit warning

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    PaperlinX to be shredded
    23/05/03 By: Andre Khoury

    Australia's largest paper maker PaperlinX (PPX) today issued a profit warning, saying earnings growth will end the year slower than seen in the six months to December 31, 2002 “and below expectations of market observers.”

    However the company said it still expects to report fiscal 2002-03 earnings around 5% ahead of last year “despite the low level of confidence that has dampened economic activity and demand for printing, publishing and office papers.”

    In February the company reported a net profit of $71.5 million for the six months to December 31, 2002, 10% higher than the six months to December 2001.

    The results included contributions from its recently acquired The Paper Company in the United Kingdom and Ireland.

    Overall sales revenues jumped 23% to $1.9 billion.

    Managing director Ian Wightwick at the time said he was comfortable with analysts' estimates for net profit of around $144 million, up from $123 million a year ago.

    Mr Wightwick today said: “As noted in recent downward profit revisions by some analysts, and contrary to the earlier expectations of industry observers, demand for printing, publishing and office papers has not firmed as we move into the traditionally strong fourth quarter of the current fiscal year.

    “The inevitable consequence of lower demand is increased competition, lower selling prices and reduced profit. In addition, international prices for imported pulp have increased, with these higher costs yet to be recovered in domestic selling prices.

    “The higher Australian dollar, while mitigating some of these pulp cost increases, is also impacting the translation of overseas earnings and reducing export competitiveness.”

    He said this weaker demand environment “has impacted pricing and profit margins”. Commenting on the outlook, Mr Wightwick said in the short term “there remains a great deal of general uncertainty. This has led to a distinct lack of economic confidence, impacting advertising and promotional expenditure.”

    PaperlinX closed yesterday at $4.84

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