Paperlinx sells its Italian business to Lecta

Troubled merchant Paperlinx is to sell its Italian business, Polyedra, to European paper manufacturer Lecta for 45m (37.5m), as part of its restructuring programme.

The group, which posted a net loss of AUD60.9m for the six months to December 2011, said that selling Polyedra would reduce its debt and help to fund the restructure of its European business.

Paperlinx executive vice president Dave Allen said the sale would release around €13m (£10.8m) in net proceeds after transaction costs and repayment of related debt in Italy.

He added: "We have a profitable UK business and strong market positions around the world and this purchase clearly shows there is value in Paperlinx. However, given the continued uncertainty of world paper markets, aggressive cost reduction is our most important initiative for the next two years. Every 1% reduction in our cost to sales ratio represents some AUD40m (£26.9m). We are aiming for a 3% total cost reduction, half of which will be generated from the current plans by the 2014 financial year."

The company’s plan for restoring profitability includes further asset sales and restructuring of Paperlinx’s central European business, to reduce costs, along with growth from diversified areas including the sign & display, digital and packaging sectors.

Paperlinx is aiming for savings of AUD61m (£40.9m) by 2014 from its ongoing restructuring programme.

The sale is expected to be completed within 90 days, subject to regulatory approvals and a final value audit.