Pact Group FY22 revenue up, but profits down

Pact Group has announced its full-year financial results for 2022, reporting a revenue growth of four per cent from FY21, but a dip in its underlying earnings before interest and tax and underlying net profit after tax.

The company’s reported revenue was almost $1.84 billion for the year, which it attributed to a “solid demand” for sustainable packaging.

However, its underlying earnings before interest and tax was $156 million, down 15 per cent from the previous corresponding period and its underlying net profit after tax was $70 million, down 25 per cent compared to the same time last year.

Pact Group said this was due in part to the absence of one-off revenue in the contract manufacturing segment recorded in FY21.

Pact Group managing director and CEO Sanjay Dayal said, “We achieved sound revenue during the 2022 financial year, against the backdrop of a challenging market and tough economic conditions.

“While we continue to see escalating demand for recycled content, our performance was impacted by higher costs of both input materials and labour, as well as additional costs due to the ongoing impact of COVID and supply chain disruption.

“We were able to recover some of these costs during the latter half of the year and will continue to do so and our focus remains on cash flow generation. Our inventory was elevated during the second half of the year as we made the prudent decision to slowly increase these levels, to ensure our customers received their orders on time, despite the supply chain challenges.

“We are now in the process of reducing these levels as shipping reliability and raw material pricing begin to show signs of stabilising.”

Within the specific business segments, its packaging and sustainability portfolio reported revenue growth of seven per cent to $1.209 billion and underlying EBIT growth of five per cent to $110 million.

“The revenue and earnings growth in our packaging and sustainability segment is an excellent result in the current trading conditions and reflects our disciplined approach to cost recovery. It also reflects strong performances in the New Zealand dairy and fresh food businesses, and in large format industrial packaging in Australia. Growth was also boosted by significant contract wins in the Asian closures business, where we lead the market in light weighting of packaging and closures,” Dayal said.

Its materials handling and pooling segment reported revenue growth of three per cent to $354 million and a decline in underlying EBIT of eight per cent to $50 million.

“The results in materials handling and pooling reflect a strong performance by our pooling business which achieved volume growth against the backdrop of supply chain challenges, and growth in our infrastructure business including completion of the contract for noise walls for the Mordialloc Freeway bypass in Melbourne. This was offset by a slowdown in activity in our Sulo mobile garbage bin business as local councils delayed tenders for bin contracts,” Dayal said.

“We anticipate improvement in the materials handling and pooling segment with increased cost recovery underway and our experience since year end is that councils have opened up their bin tender processes and our Sulo business has been very successful in winning contracts that will be evident in FY23.”

As for its contract manufacturing segment, it reported a decline in revenue of five per cent to $306 million and underlying EBIT loss of $4 million.

“We advised during the first half of the year that trading would remain challenging in our contract manufacturing segment, and the business continued to be impacted negatively during the second half of the year by elevated raw material pricing and supply chain costs, and by lower volumes,” Dayal said.

“With a new management team in place we have made progress in the areas of expense management and in winning significant new contracts. These new contracts will contribute volume and earnings growth to FY23, and pleasingly, we are seeing the impact of the supply chain issues stabilise.”

Dayal also provided a strategic business update, saying the business has opened a new joint venture recycling facility in Albury with two more joint venture recycling facilities in development, and fully acquired the Synergy Packaging business.  

Pact’s sustainability credentials has also been further strengthened with the announcement that it has set an emissions target to reduce scope 1 and 2 Greenhouse Gas emissions by 50 per cent by 2030 in Australia and New Zealand from a FY21 baseline. This is in addition to its target to increase average recycled content across plastics to 30 per cent by FY25.

“Pleasingly, Australia and New Zealand are committed to progressing a legislative platform that advances sustainability and the circular economy. Polices such as the container deposit scheme and the waste export ban are providing the right environmental platform to grow Australia’s recycling industry and increase domestic demand for Australian recycled content,” Dayal said.

“We look forward to delivering further value to our investors, and I would like to thank the team at Pact for their efforts in what has been a very challenging year.”.

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