The trans-Tasman sheetfed and web group reported a 4.4% fall in revenue to NZ$280 million ($217 million).
Blue Star reported earnings before interest, tax, depreciation and amortisation (EBITDA) of NZ$20.7 million for the six months to 31 December.
“The poor trading environment that impacted first-half performance is expected to continue and it is likely that EBITDA will fall short of the prospectus forecast of NZ$53.6 million for the full year ending 30 June 2012,” according to its financial report.
Net profits actually increased by 277% to NZ$12 million, however, these gains seem largely related to one-off items rather than operational improvements.
There was some relief thanks to an improved liabilities position, with net debt falling 15% to NZ$387 million.
Australian revenue fell 10% to NZ$164 million, while New Zealand revenue rose 5% to NZ$110 million.
The group’s divisional revenues were a mixed bag, with the Print Australia division seeing a 12% drop to NZ$117 million, Print New Zealand falling 6% to NZ$74 million, and Webstar up 11% to NZ$89 million.
Blue Star wrote down goodwill by NZ$72.7 million across Print Australia and Webstar.
The company called the results “disappointing” and blamed “difficult trading conditions” and “unsustainable pricing strategies” from competitors.
“Such action has put further margin pressure on Blue Star’s business. Until overcapacity in the industry is resolved, this margin pressure is expected to continue.”
New managing director Phillip Bower told ProPrint that Blue Star had been forced to adapt given that unsustainable prices were “very prevalent” and overcapacity problems showed no sign of easing.
“We continue to look at cutting our costs. That’s just the name of the game… Blue Star is no different from any other business. You always have to keep costs in line with revenue and margins,” he said.
Some ways in which Blue Star hopes to overcome the tough conditions include getting stricter on collecting debts, reducing inventory and deferring capital expenditure.
The downbeat results cast doubt on assurances that Blue Star made to bondholders and lenders last year to get its debt restructure over the line.
The company conceded that if its cost control measures don’t work, “the group may not comply with key covenant measures or have sufficient levels of liquidity available”.
In some good news, the new Webstar facility outside Auckland is now fully operational, reaching expected quality levels and focused on meeting operating efficiency targets, “albeit a few months later than expected”.
Print Australia is gaining new revenue from the HP T300 inkjet web press it commissioned last July, according to the report.
The division is also achieving anticipated cost savings and pursuing “a range of operating improvements”, although Bower wouldn’t reveal what they were.
Print New Zealand has successfully overseen the relocation of Panprint to new premises, the report added, while Print New Zealand has also won “major new contracts”.
Blue Star ended the 2010-11 financial year with revenue of NZ$570 million and losses of NZ$85 million.
What are your thoughts on this story? Leave your comments below.
Comment below to have your say on this story.
If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.
Sign up to the Sprinter newsletter