Australian Share Tips – Stock of the Week
Stock of the Week Paperlinx PPX
Paperlinx (PPX) is a distributor, manufacturer and seller of paper across the world, and has recently emerged as one of the key shares to buy.
In February, PPX reported its financial results for the 31 December half, which included net profit after tax of $35.3 million an 8% increase on year and in line with guidance. The profit included a one-off cost of $6.4 million before tax arising from restructuring costs of $14.1 million.
Revenue for the period was $3,783 million, which was a slight 4% decrease on the previous corresponding period.
These results were not overwhelmingly positive. However, there is no doubt that PPXs financial performance has been negatively impacted by the upfront investment made over the past couple of years against the Maryvale pulp mill upgrade and associated projects.
These items are expected to provide substantial benefits into 2009 and beyond, a fact that the market is seeing as a sign of a strong future for PPX.
The company has recently completed a number of strategic initiatives that are already delivering significant benefits, including the upgrade of the Maryvale number 1 sack kraft machine, the closure of the Shoalhaven number 1 and 2 paper machines, and the creation of PaperlinX Office and PaperlinX Printing and Publication Papers.
Cost reduction programmes implemented during the last half have included the reduction of shifts on a number of paper machines, and conversion of oil and coal fired power plants to natural gas.
PPX sees future gains as coming from continued improvements in operating efficiencies, cost reductions and product rationalisation, potentially supported by pricing as global capacity utilisation improves.
The upgrade of PPXs Maryvale pulp mill and its associated projects will provide additional benefits for 2009 and beyond on costs, quality and environmental measures.
After substantial falls during the last few years, PPX has finally been able to move strongly higher and looks poised to continue beyond the $3 level, suggesting that it will be one of the better Australian Share Tips.