Paperlinx to exit paper manufacturing

Paperlinx is to abandon paper manufacturing, closing its Tasmanian Wesley Vale operation and part of its Burnie operation in Australia, as part of an ongoing process to cut costs.

On completion of the plans, Paperlinx will be solely a merchanting company, distributing paper, sign and display and graphics materials, as well as packaging products.   

The move will result in 252 Australian job cuts across the two mills over the coming months.

A sale of the remaining operations at Burnie is an alternative to complete closure, and 170 jobs will be maintained pending the outcome of the sale.

It is expected that the closure of the two mills will be completed by June 2010 and will cost the company about AUS$170m (£95m).

Tom Park, Paperlinx managing director, said: "While this was a difficult decision to make, it provides greater certainty for all our stakeholders and removes one of the key uncertainties that has been overhanging the company and its employees."

He said the operations at Bernie and Wesley Vale are together "substantially loss-making" and this level of loss, along with the current high Australian exchange rate and the business configuration, was unsustainable.

In February, Paperlinx agreed to sell its Australian manufacturing business Australian Paper for AUD$700m to Japan-based Nippon Paper Group.

A month later, the company posted a AUD$560m after-tax loss for the six months ending 31 December 2008.

Dave Allen, vice president of Paperlinx in the UK, said the move signals the final exit of Paperlinx from manufacturing and allows the company to focus all its efforts on growing its paper merchanting business.

He said: "The move also means we will develop new areas in sign and display, and other divisions such as our newly launched litho consumables business Total Print Supplies, and our new national packaging business Purple Packaging."