The falling demand for newsprint is forcing the long-established company CPH to write down CHF 150 million. The question arises as to how long the troubled business can be sustained.
The falling demand for newsprint has consequences for the long-established company CPH.
The Central Swiss industrial group CPH, which is primarily known for its newsprint, is not giving its shareholders a break. The company was able to announce the all-clear on Wednesday regarding an attack by cybercriminals on its IT systems. The systems could have been restored and a material impact on the 2022 business results is not expected. But just two days later, the company alienated its shareholders with a profit warning.
CPH announced on Friday that they were forced to make a value adjustment of CHF 150 million at the expense of the income statement for the past year. It is therefore foreseeable that the bill will close in deep red. The analysts at Zürcher Kantonalbank (ZKB) had previously expected a slight surplus of CHF 1.6 million at the level of consolidated earnings for 2021.
As with the cyber attack, it is about the business of the paper division. Because of the hacker attack, CPH was forced to interrupt the production of newsprint in Perlen for around six days. This activity has been suffering from falling demand for years. CPH puts the industry-wide decline in Europe at 6 to 8 percent per year. As is well known, the company owns the most modern paper machine of all European suppliers, but that is small consolation when it can potentially no longer be sufficiently utilized.
Management assumes that demand will continue to decrease over the next few years. So far, CPH’s strategy has been to sit out the crisis and count on competitors with older systems suffering even more from it. In view of the adverse prospects, however, the group’s management will have to consider leaving the newsprint business to others.