A Rough Day For Ink-on-Paper Companies

Two giants of the ink-on-paper business, NewPage and Quad/Graphics, were beaten up by financial markets on Wednesday.

A NewPage bond issue dropped 14% to only 12.1 cents on the dollar, down from 70 cents just five months ago, Bloomberg reported. Investors seem to have given up hope that North America's largest maker of coated paper will be able to pay off or refinance the bonds next year.

The word in the paper trade is that NewPage officials do not protesteth too much these days when the words "Chapter 11" are mentioned and are starting to acknowledge that reorganization is inevitable.

In what may be good news for NewPage, The Cape Breton Post reported Wednesday on persistent rumors that a sale of the company's Port Hawkesbury, Nova Scotia mill is imminent.

Quad/Graphics' stock price, meanwhile, dropped 25.9%, the New York Stock Exchange's second largest decrease for the day, after the company announced quarterly earnings. In less than two months, it has lost more than half of its value.

The numbers didn't seem so bad -- sales down less than 1% and adjusted EBITDA down 15% from the same quarter last year. The big printing company says those results were in line with its plans.

But Wall Street was disappointed by the 22-cent-per share loss; the consensus expectation was a 32-cent profit, wrote Rich Smith at The Motley Fool. And investors were spooked by most of Quad's cash flow going to capital expenditures rather than paying down debt, he said.

It probably didn't help that Quad said it "experienced net sales declines in our book segment and continuing headwinds from industry pricing pressures."