Amcor Will Close Burnie, 200 Jobs Go
Sydney Morning Herald
Thursday June 4, 1998
Big charges for plant closures and restructuring will lop $180 million from Amcor's full-year results, with the company warning that more abnormal losses are likely next year.
The hefty abnormals bill surprised the market and contributed to a slide of 20c, or 2.9 per cent, in Amcor's share price yesterday, leaving the stock at $6.98 and wiping out the gains of the past month.
About $55 million of the $180 million of net abnormal charges arises from Amcor's decision to close its historic, 60-year-old pulp mill at Burnie in northern Tasmania.
Up to 200 workers directly associated with the pulp mill will lose their jobs when the mill finally shuts down in the December quarter.
Another 50 contractors working for Amcor's woodchip supplier, North Forest Products, a subsidiary of North, will be made redundant.
North must also find new export markets for up to 300,000 tonnes of hardwood woodchip that would have gone to Amcor's plant - a task made more difficult by the economic downturn in Asia and depressed conditions in world pulp markets.
Amcor contended the existing pulp mill, which feeds the adjacent paper-making facility at Burnie, did not offer the potential for capacity expansion or reconfiguration which could make the mill more profitable.
Although world paper demand is expected to increase and prices are expected to rise, an excess of paper-making capacity and lower demand in Asia are restraining prices all over the world for pulp feedstock and some paper types.
Swedish forestry group Stora Kopparbergs Bergslags and Finland's Enso Oyj yesterday cited volatile paper prices and the current market conditions as some reasons for their $US8.35 billion ($13.6 billion) merger to create the world's biggest paper company.
Analysts suggested the Burnie closure - which has been expected for some years - was accelerated by Amcor's new managing director, Mr Russell Jones, who assumed the chief executive role just two months ago.
Some analysts believe Mr Jones wants to stamp his mark on the packaging and paper group as quickly as possible by swiftly closing or selling underperforming businesses and so turn around investor sentiment.
Amcor's board wants management to achieve returns across the group of 15 per cent gross profits to funds employed, well above the average 9.9 per cent achieved in the first half year. The paper division is returning slightly below 8 per cent on this
Amcor intends importing 75,000 tonnes a year of pulp feedstock for its two Burnie paper machines.
© 1998 Sydney Morning Herald
