Loss-making paper supply merchant and takeover target PaperlinX has unveiled a fresh restructuring program to stop the losses from its moribund European arm and return the group to profitability.
PaperlinX reported to the Australian stock exchange after the close of trading on Wednesday that it posted a loss after tax of $60.9 million for the six months to December 31.
This compared with a loss of $10.2 million for the previous corresponding period.
Chief executive Toby Marchant said the results were a very disappointing reflection of PaperlinX's exposure to the European economic crisis.
Mr Marchant said additional liquidity was need by the company through asset sales and other potential sources to address a vital restructuring and simplification program for its Continental European business.
"We have made progress in reducing our cost base and will see benefits starting to flow from this in the second half and beyond, and our working capital is at record lows," he said in a statement.
"But this is insufficient to offset volume and price pressure in the half."
PaperlinX told the stock exchange that severe economic pressures in Europe led to a sudden and severe decline in paper consumption, compounded by falling prices in Italy, the Benelux countries and Germany.
It also said the after tax loss included an impairment charge of $39.4 million, mainly on goodwill.
"The restructure announced in July 2001 is largely complete and benefits are ahead of expectations and will impact the H2 (second half) results and beyond.
"Other opportunities to reduce costs and restructure the business model are supported by the board," the company said.
Mr Marchant said external conditions remain very challenging but he had the support of the board to do what needed to be done to restore profitability and transform the business into a broad-based materials supply company.
No dividend will be paid for the half.
PaperlinX in December reported that it had received a proposal from an unnamed private equity bidder and was considering offers for parts of its business from other buyers.
Shareholders at the time were told to expect another loss because of the company's heavy exposure to Europe.
PaperlinX shares closed up 0.6 cents at 10.5 cents on Wednesday.
The private equity offer in December, which PaperlinX said was incomplete and conditional, was for 9 cents per ordinary share and $21.85 for preference shares.
This could value the company at up to $500 million when incorporating outstanding debt and other liabilities.
Major shareholder Orbis Investment Management has been pressing PaperlinX to sell its troubled European assets.
