Paper merchant Paperlinx says many of its key markets continue to struggle as worldwide demand for the company’s products declines.

Paperlinx chairman Harry Boon said general market confidence remained low in most of the company’s key markets.

“The structural decline in core paper markets has continued, and we are not forecasting a recovery in overall volumes,” Mr Boon told shareholders at the company’s annual general meeting on Friday.

“However, whilst many paper markets are down, there is real and continued growth in some geographies such as Asia and central Europe, and in a number of niche paper sectors, such as digital, that we are successfully focusing our attention on.”

Mr Boon said prices were moving, generally, in a positive direction.

In Europe, paper manufacturers were increasing prices, which Paperlinx was passing on, thus helping to offset the weak volumes.

Paperlinx was increasing market share, revenues and margins in diversified sectors, which was starting to have a significant effect on earnings.

The benefits of a restructure of Paperlinx’s operations in 2011 would start to flow through to the bottom line in 2012, with full benefits in 2013.

The restructuring program was aimed at cutting costs and overheads and focused more on diversified product categories such as sign and display and industrial packaging.

“More than ever, we remain well-positioned for any potential cyclical recovery, although no recovery is included in our internal forecast,” Mr Boon said.

Paperlinx chief executive Toby Marchant said the company’s September quarter results were tracking at a level similar to the second half of financial year 2011.

Volumes were below last year as demand was unchanged from the depressed levels experienced in the fourth quarter of 2011.

He said that given the decline in Paperlinx’s core paper volumes, diversification was essential.

That included selling new products to existing customers, primarily printers, and finding new customers such as specialist sign makers and packaging converters.

Paperlinx’s diversified products fall into four sectors: sign and display, industrial packaging, graphics and digital.

The sign and display market is currently the largest diversified business.

Products sold to this market comprise wide-format printers, inks, cardboard, plastics, metal, vinyl, textile, vehicle graphics, banners, posters and LED lighting.

Paperlinx is also reviewing its business and capital structure.

The outcome of the review is expected before the end of the 2012 financial year.

In August, Paperlinx reported an annual net loss of $108 million for the 2010/11 financial year, compared to a loss of $225.3 million in the prior year.

Shares in Paperlinx were steady at 8.6 cents on Friday.