Paperlinx to return to profitability by 2014: Marchant

Paperlinx's chief executive has said the merchant is on track to return to profitability by 2014, despite a weak economy and low staff morale.

Chief executive Toby Marchant said chairman Harry Boon was the best person to turn the company's fortunes around following last month's "very important" defeat of Andrew Price's coup attempt.

Marchant told ProPrint that "the future for Paperlinx looks much improved" after "a really turbulent few years".

"The management and the board know we're in a really tight spot... Everyone knows how severe it is," he said.

That was why Paperlinx was committed to finding at least $61 million in savings so it could wipe out its red ink by 2014, he added.

"We're actually going for something significantly more than that now – and that's just on the costs side," he said.

Marchant said borrowing more money was not an option as that would only put the company in a worse position.

He also said he was very confident the three-point plan to turn around Paperlinx would succeed.

The plan involves selling assets to generate cash, restructuring and growing the diversified products side of the business.

Marchant said most of the restructuring would occur in Europe, "where the real problems are", and that Australia's restructuring had "largely been implemented and very effectively".

"The numbers from our Australian business have significantly improved in the course of the last six months... That's a business in far better shape than it was."

He said Australian staff had performed strongly despite company morale reaching "something of a low point".

Marchant said if forecasts were correct, it would soon be inaccurate to call the company a paper merchant.

The non-paper side of the business currently generates 24% of gross margins, but that is expected to reach about 50% in three years, he said.

Marchant told ProPrint he was happy Paperlinx's "excellent chairman" had survived Price's challenge because Boon knew how to lead a public company that was trying to turn itself around.

However, Price could strike again if it looked like the three-point plan wasn't working, said Marchant.

"If we don't deliver we'll get a challenge from someone and that could be Price," he said.

Marchant also said the company would consider any future takeover bids with an open mind – provided they offered fair value to shareholders who had endured "a rough ride".

"I can't say the door is shut to anything. We've got to look at all possibilities... It would depend on value and then it depends on the quality of the offer, because this is an industry that at some point needs consolidation."

Responding to critics that board members didn't have enough 'skin in the game', Marchant said they had been keen to buy shares, but had been forced to wait to avoid breaking insider trading rules. He said he had just bought 900,000 shares after a window opened for the first time in a year.

Marchant also hit out at prominent critic Graham Critchley, saying he would take legal action if he didn't remove "defamatory" statements from his blog and apologise.

"There comes a point when enough is enough," he said.

But Critchley said he wasn't worried. "So he's going to sue me? Fine – bring it on. I look forward to discovery of documents."