Page 24 - Print 21 Magazine May-June 2019

Paper
Spicers diversifying for growth
Print businesses are all looking for new markets as commercial volumes and margins tighten. Spicers CEO
David Martin tells Wayne Robinson how the business is leading the charge as it enters new ownership.
All forward-looking print businesses are looking outside their traditional fields for sustainable business growth as commercial print continues to contract, and their suppliers are in exactly the same boat – none more so than paper merchants, with Spicers now on the diversification track.
In July, Spicers will enter the next stage of its two-decade journey, when it becomes part of Japanese trading giant Kokusai Pulp and Paper, closing the chapter on a roller-coaster ride
for the business that began when Amcor divested its paper division
at the end of the last century. The ensuing 20 years saw the company rebranded as PaperlinX and list
on the ASX, buy up a host of local merchants to become the big kahuna of Aussie merchanting, then engage on a global buying strategy to become Europe’s number one merchanting group. But this meteoric rise was short-lived. What came next was
a titanic boardroom battle with
rival shareholder groups, and the progressive crumbling of its European business in the years following the GFC, with costs blowing out, resulting in the withdrawal of the company back to its home base and, finally, the ditching of the PaperlinX brand in favour of a return to Spicers, the best known of the merchants it bought back in 2001.
Today the company lays claim
to a quarter of the Australian and New Zealand commercial paper market, a share that’s halved since its heyday, and this in a market that has been shrinking every year. However, this share is misleading, as Spicers is diversifying and looking to new markets to leverage its skill sets and grow into, and with success. Today Spicers is much more than a commercial paper merchanting business.
First though, let’s turn to the impending sale to Japanese
24 Print21 MAY/JUNE 2019
trading giant KPP. It is subject to
a shareholder vote on June 26, but CEO David Martin tells me this
will go through with the major shareholders – a combination of private and public funds from here and the US including the likes of the Telstra Pension Fund – set to give it the nod, as they will be able to walk away with some recompense for what have been, from a shareholder’s perspective, some years of travail.
At the turn of the century when the company listed the share price was $7, in 2009 it was at 70c, today it is 7c – which is actually triple the value it was at the company’s nadir three years ago.
Spicers is being bought for $147.6m, with KPP paying $90m in cash and the rest coming from the sale of realisable Spicers assets. KPP is not a merchant itself; it is a trading company which supplies paper merchants in Japan – some 120 of them – using its immense buying power to extract the best deals.
“For Spicers and its customers, the injection of capital into the company to enable to invest in the future is good news. KPP wants to invest in the business,” Martin says.
In the last financial year Spicers achieved sales revenue of $384m with Print & Packaging up by half a per cent to $304.7m, while Sign & Display rose by 2.6 per cent to $79.3m. Australian sales were up to $204.4m from $201.8m, although this is still behind the 2016 sales of $211m.
The Australian EBIT was up by 80 per cent at $4.2m, which the company says was due to improved trading in key product categories.
KPP has revenues of JPY377.7bn ($4.8bn) generated by 950 staff operating across 26 sites. It is Japan’s biggest selling paper company, and an environmental pioneer. It listed on the Nikkei in June. Its growth strategy, set last year, is business expansion through M&A in the Asia Pacific.
Contrary to the perception of Japanese corporates KPP has, according to Martin, displayed a willingness to listen and to act.
He says, “KPP has been agile, has clearly understood the dynamics here, and has been making great decisions. They are on the front foot. We have an integration team, which is working extremely well. I’m enjoying leading that on behalf of our business, I think we are learning from each other.”
KPP’s entry into Australia and New Zealand through Spicers is
its first overseas venture, and
the first of many as it seeks to establish a global footprint. Indeed, David Martin, who is staying on
as CEO of Spicers ANZ following
the acquisition, has overseas acquisitions as part of his brief, with KPP learning from its experience of coming down under in its efforts to acquire more companies.
Sourcing stock is a key issue
for merchants. As part of KPP, Spicers will have a more secure supply stream, and there will be
more options available. The world’s paper mills are, it is fair to say, in a period of turbulence, as they try to match diminishing demand with supply, which can be problematic
for merchants the size of Spicers,
and which operates on a JIT basis
for its customers. It is essentially trying to predict demand, and can often be left holding the baby if
it has over-ordered, or conversely
left scrambling for stock if it has under-ordered. Being part of a much bigger organisation will help to ensure Australian printers are in prime position for the stock they want, when they want it. Martin says, “Our value is in JIT for the market. Holding the stock and ensuring supply in a period where mills are closing capacity is just part of our value proposition. The skill of Spicers is in meeting the needs of the market and managing that supply chain; how we manage the portfolio is crucial.”