Paperlinx asset sales reach $120m as CEO Marchant departs

Embattled Paperlinx boss Toby Marchant is to depart as the struggling merchant has continued to shed overseas operations.

Paperlinx said today's announcement signalled the end of its year-long strategic review, which had left it leaner, more liquid and focused on key markets.

The news followed last month's announcement in which Paperlinx predicted a full-year loss of $171 million and said it expected to raise $93 million from the sale of American and Italian assets.

It has agreed to sell its operations in Slovakia, Hungary, Slovenia, Croatia and Serbia for €19.6 million ($23.5 million) and its "consistently loss-making" South African business for ZAR50 million ($5.9 million).

The European sale price is $2 million above book value and the South African sale price $2 million below, said Paperlinx. The deals should be finalised in three months and are expected to generate net proceeds of $27 million.

Deputy chief financial officer Wayne Johnston told ProPrint that the European operations had been collectively profitable, but required "significant reinvestment" to remain viable.

He also said that the South African business had struggled since being acquired in 2003 because it had been ranked three or four in a difficult market and lacked the scale to be profitable.

Marchant, who is leaving at the end of July, said the completion of the strategic review marked "a major turning point in the transformation of Paperlinx". He told ProPrint in April that the company was on track to return to profit in 2014.

Marchant has presided in a fall in the share price from 43.5 cents to 4.6 cents at the close of yesterday's trading.

Prominent hybrid security holder Graham Critchley was critical of Marchant's reign. "The share price tells everything. Listen to Mr Market."

Paperlinx also announced a series of voluntary pay cuts – 15% for its directors and 7.5% for most senior managers in Australia, Europe and the UK.

Johnson called it "admirable"; Critchley slammed it as "pathetic symbolism".

Paperlinx confirmed the strategic review had left it with "substantially reduced corporate overhead expenses".

Johnson said the difficult market and Paperlinx's financial problems had placed greater emphasis on restraining costs, although it had always been an area of concern.

Paperlinx said it had appointed executive vice-president Dave Allen as interim chief executive and would consider internal and external candidates to replace Marchant.