Decision near in ACP print dispute

PRINTING and distribution group PMP says it expects a resolution in "weeks, not months" to talks it is holding with PBL Media's ACP Magazines over whether it will continue as the company's major printer.

PRINTING and distribution group PMP says it expects a resolution in "weeks, not months" to talks it is holding with PBL Media's ACP Magazines over whether it will continue as the company's major printer.

Earlier this year, ACP executives discussed with staff the possibility of starting up its own printing operation once its existing contract with PMP expires, a deadline believed to be at the end of this year. The development came in the midst of intense negotiations with PMP over the last 12 months about a new printing contract, prompting a sell-off in PMP shares.

But since early last month, PMP's share price has rebounded by more than 40 per cent, amid market speculation about whether PBL Media will want to spend more money on establishing a printing operation in-house in the present tough economic environment.

Meanwhile, talks between PMP and ACP -- Australia's largest magazine publisher -- are continuing. When quizzed on the talks, PMP CEO Brian Evans said: "The answer is they're still going, and we expect that within weeks, not months, the situation will be resolved."

Pressed on the subject, he said: "We can't be any more specific than that. (But) we are not in a position today to be able to confirm what ACP's decision will be."

Even if ACP ultimately proceeds with a new greenfields printing operation, PMP could still benefit because it could take "years, rather than months" to establish, according to one market analyst.

It would be tough for ACP to find an alternative printer to PMP large enough to handle its output during this period, the analyst said. This factor could increase the leverage PMP has in its present negotiations with ACP, potentially enabling it to extract a price hike for its printing during the time ACP takes to establish any in-house operation.

Mr Evans' comments came after the group recorded a 6.8 per cent fall in operating profit to $85.1 million, after earnings were affected by higher print volumes and the integration of new businesses on the company's operating costs. The profit fall was in line with a downgrade released to the market in May.

Mr Evans said the company's acquisition of Times Printers last year -- which ultimately saw it close the operation and move its printing equipment to other PMP plants -- helped to eat into its earnings.

However, a positive of the result was PMP's reduction of net debt to just under $200 million by June 30, well below the updated guidance it gave in May of $220 million. The market appeared to respond positively to this figure, marking up the company's shares 10.5c to $1.25 yesterday.