Australian Paper facing tough choices

26 February 2015

Australian Paper says unless it lifts performance, and soon, the business may not survive, following four straight years of losses.

Chief operating officer Peter Williams says a turnaround in financial performance is ‘critical’ for Australian paper production to continue. The company has just announced the closure of its 60-year-old Shoalhaven mill.

“We want to see paper production continue in Australia, however, we have now reached a point where without significant improvement to our cost structures, the ongoing competitiveness, and therefore, viability of our operations will be severely tested," Williams says.

The company today begins a major turnaround attempt that will review of all areas of the business and restructure corporate operations to bring it back to profit.

The decision comes just days after it closed the Shoalhaven paper mill with the loss of 75 jobs and calls into question the viability of paper production with demand in freefall and cheaper paper flooding in from Asia.

Australian Paper directly employs 1250 people and supports almost 6000 full time equivalent jobs across its operations, all of which are at risk if the strategy fails.

Williams says that changes will be required across all areas of the business over the coming months to remain viable.

“This situation has been driven by tough operating conditions and a flood of imported paper from Asia,” he says.

“We need to restructure our operations and work practices to improve efficiency and productivity; work closely with all our suppliers to reduce input costs; and rebuild our market share and performance.”

He says Australian Paper would also need to address external issues like competitive long term pricing for key manufacturing inputs such as gas, certainty of fibre supply, and a strong regulatory response to paper being dumped into Australia

Williams says parent company, Japanese paper manufacturer Nippon Paper Industries (NPI), shares the long term vision of continuing to manufacture paper in Australia but needs to see financial improvement.

“NPI wants to continue investing in Australian Paper and strongly believes we can effectively compete with overseas paper manufacturers, provided we take strong action now to reduce our cost base, rebuild market share for our existing products and capitalise on emerging growth markets such as packaging and recycled office papers.”

NPI last year opened a $90m recycled pulp mill in Maryvale, NSW with an annual production capacity of more than 45,000 tonnes with technologies developed in Japan in an effort to differentiate its products in the ‘environmentally conscious’ Australian market.

The company has invested more than $1bn in Australian Paper in the past five years.

Williams says the turnaround will not be successful without the support and commitment of employees, unions, the government, suppliers, and other key stakeholders

“We will work closely with them to transform the business together with a key need to develop the right platform for long term viability and success,” he says.

Australian Paper is the only manufacturer of office, printing and packaging papers in Australia

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