SYDNEY - Australia's biggest commercial printer, PMP, cut its earnings forecast for fiscal 2005 by as much as 17 per cent on lower profit margins, restructuring costs and higher fuel charges, driving its shares down by a third.
PMP, which prints and distributes magazines, retail catalogues and directories, said arestructure of its print business had reduced capacity more than expected.
That limited the volume of work processed and crimped production of higher-margin, uncontracted spot work.
"What makes the market more unsettled is that they have business but they have no capacity to handle it," said Albert Hung, chief investment officer at Alleron Investment Management.
"Did the management understand what they were doing?
"People are sceptical about the strategy management has adopted so far," he said yesterday.
The company said annual earnings before interest and tax (EBIT) were likely to be in the range of A$70 million ($74.5 million) to A$72 million, down from a previous forecast of A$84 million for the year to June 30.
"We continue to see lower gross margins in print," PMP chief executive David Kirk, a former captain of the All Blacks rugby team, said in a statement.
"Higher oil and fuel charges and continued delays and higher costs associated with implementing an outsourced distribution arrangement ... contributed to the forecast earnings reduction," he said.
Shares in PMP plunged as much as 36 per cent to A$1.20 on the announcement, the stock's lowest since December 2003.
By the close, PMP had regained some ground to be down 24.5 per cent, or 45Ac, at A$1.40.
PMP said a year ago it would install four new 64-page presses, relocate other equipment, and upgrade its facilities in Adelaide, with the new investment making a full contribution by January 2006.
Additional redundancy costs would be seen in the second half, PMP said. Net debt was likely to be A$295 million for the year and an interest cost of A$25 million was expected.
