Pact Group (ASX:PGH) has reported $1.809 billion in revenue, down 1.4 per cent from the previous corresponding period for its 2020 full year results, with a statutory net profit after tax of $89 million for the year ending 30 June 2020.
The company said this included a significant gain after tax of $16 million. Its EBITDA was reported to be $301.8 million, up from the $230.7 million it reported in the previous corresponding period.
Pact Group CEO and managing director Sanjay Dayal said the company delivered improved earnings and margins and has strengthened its balance sheet in FY20.
“These results, delivered in a period where we faced the uncertainty of COVID-19, and the challenges of other macro events, illustrates the resilience of our portfolio, and our discipline in managing cash and protecting our balance sheet,” he said.
“I am proud of how well the company responded to the challenges of COVID-19 and the commitment demonstrated by our people… Our diversified portfolio performed well.”
The company’s packaging and sustainability segment delivered a decline in statutory EBITDA to $181 million in FY20 from the $155 million it recorded in FY19. The company said this was due to the growth in New Zealand and Asia, however attributed “challenging trading conditions” in Australia to have impacted local business.
It also mentioned that the net adverse impact of COVID-19 to segment EBITDA was about $5 million.
Within materials handling and pooling, the business reported an EBITDA of $73 million, up from $51 million in FY19. The company said crate pooling revenue was up 27 per cent following the start up of pooling services for ALDI, which led to its growth within the segment. Higher reuse services in the US and efficiency benefits from overhead reduction initiatives also contributed to the gains.
Within its contract manufacturing services business, EBITDA was recorded at $48 million in FY20, from $25 million the same time last year. Pact Group said this was because of higher sales volumes in the hygiene category as a result of increased demands for these products.
“Demand in most consumer sectors was resilient during the COVID-19 affected period, particularly in food, home care and hygiene categories,” Dayal said.
“We experienced some demand slow down in the industrial sector, impacted by end-market disruption during COVID-19, and our hanger reuse business, TIC, was adversely impacted by significant weakness in the clothing retail sector. We responded rapidly with tight cost management to mitigate earnings impacts.
“Underlying volumes in our Australian packaging business remained challenging. Whilst the industrial sector experienced some benefit in the second half from easing of drought conditions, this benefit was offset by the impact of bushfires and other macro factors.
“Volumes into the dairy, food and beverage sector were lower, and health and wellness volumes continued to be impacted by customer destocking. We improved the balance sheet despite the challenging backdrop in the period.”
Moving forward, the company aims to focus on several initiatives:
- The turnaround of its Australian packaging business: The company has transformed its operating model by implementing a new customer-centric structure, appointed new leadership to lead the transformation and has investment in improved platform capability underway.
- The expansion of its recycling capability: The company’s formalised joint venture agreement with Cleanaway and Asahi to jointly develop a PET recycling facility in Australia is underway, with completion expected in 2022. It has also entered an agreement to acquire Flight Plastics NZ, a sustainable packaging provider, to support the A.NZ fresh food segment.
- The expansion of its reuse platform: It has already in place agreements with ALDI and a contract in the US.
- The sale process in respect to its contract manufacturing business: It aims to recommence the sale process in respect of its contract manufacturing business after suspending the process due to restrictions following COVID-19.
“We are progressing well in the execution of our strategy to lead the circular economy. We have completed the critical first steps in the turnaround of our Australian packaging business and have clear plans for the next phase,” Dayal mentioned.
“Our recycling initiatives will see us grow our recycling capability to over 50,000 tonnes by 2022, providing a point of differentiation in the market and the supply required to enable is to meet our target of 30 per cent recycled content across our portfolio by 2025.
“We expect our diversified portfolio to be resilient with trading in the first quarter of FY21 in most sectors to be generally in line with recent trends.”
At the time of writing, the company’s shares were trading at $2.50.
The company’s financial results for FY20 reflect the adoption of AASB16: Leases.