Speciality packaging solutions provider Pact Group (ASX:PGH) has revealed its half year results for 2020, announcing a three per cent revenue dip to $885.1 million from $915.4 million in the previous corresponding period.
Its statutory net profit after tax was $35 million for the half year ending 31 December 2019.
In a briefing call, Pact Group managing director and CEO Sanjay Dayal said the financials reflect “a difficult period” in its Australian business from a demand perspective.
“Underlying demand in our Australian packaging business remained challenging. In the industrial sectors, adverse macro-economic impacts continue to weigh on demand. This includes direct and indirect impacts from drought in Australia,” he said.
“Demand in our consumer sectors remained subdued, whilst volumes in the health and wellness sector were adversely impacted by customer destocking. Health and wellness demand also adversely impacted our contract manufacturing business, with volumes down significantly over the prior year.”
The company identified growth in the materials handling and pooling segment through the expansion of crate pooling operations in Australia to support ALDI and the incremental impact of the TIC acquisition.
It also identified that packaging and sustainability volumes were lower as the Australian business continued to experience challenging trading conditions in a number of sectors, including a weakening in agricultural demand due to worsening drought conditions, which offset modest volume growth in New Zealand and Asia.
Pact Group chief financial officer Richard Betts said, “The operation environment has been challenging. The packaging segment delivered an EBITDA of $75 million; $1 million up from the prior year.”
“Stable volumes in our Australian business remains a key priority.”
During the briefing call, the company also announced a new strategy that outlines its plans to improve its competitiveness and stabilise volumes.
“Our vision is to lead the circular economy through reuse, recycling and packaging solutions, clearly aligning our special capabilities to industry needs,” Dayal said.
“The plastics industry is changing rapidly, and our strategy sets clear priorities regarding our response to this change. Plastics sustainable is not only a social and environmental need; it is an economic necessity.
“The competitiveness of our packaging platform is critical to our success. We will focus on improving our overall competitiveness through organisational structure, operating efficiency and the performance of our equipment. Our priorities will be assessed through the lens of our customers.
In specific, its priorities are as follows:
- Simplify its focus portfolio and strengthen its balance sheet
- Improve turnaround and defend core A/NZ consumer packaging business
- Lead plastics recycling in A/NZ. As part of this, the company has inked a Memorandum of Understanding with Cleanway and Asahi to jointly develop local plastic recycling capability.
- Scale up reuse solutions
- Differentiate industrial and infrastructure sectors
- Grow Asian packaging platform
The company will release further details of the strategy on 25 March as part of a proposed Pact Investor Day.
“We have a clear vision for the future and when we combine capability, collaboration and strong leadership, we can deliver significant long-term value,” Dayal said.
“It establishes a clear direction for our company. We have significantly underinvested in our core assets for a number of years. This has adversely impacted competitiveness and our ability to win. Our strategy allows for sustaining capital over the next five years.”
At the time of publication, the company’s shares were trading at $2.52.