Pact Group’s EBIT and NPAT dip in 1H FY23 results

Pact Group (ASX:PGH) has released its first half FY23 financial results, reporting an underlying earnings before interest and tax (EBIT) of $75 million, down eight per cent from the previous corresponding period.

Its underlying net profit after tax (NPAT) was $26 million, down 33 per cent from the same time last year.

On the other hand, it reported $998 million in revenue, up eight per cent from the previous corresponding period.

The company’s managing director and group CEO Sanjay Dayal said the revenue growth in the first half of the financial year reflected a more stable supply chain later in the half, combined with increasing demand for sustainable packaging. 

“Strong sales in the last six weeks of the half year provides momentum going into the second half of the financial year. We were particularly pleased with the performance of our packaging and sustainability segment, where we recorded growth in New Zealand fresh food packaging, and in Australian closures,” Dayal said.  

“Our Gearing was temporarily elevated at the reporting date reflecting a combination of increased sales late in the half year, which is evident in our trade debtors balance at reporting date, and due to the acceleration of our capital program, with $65 million spent on capital during the period. We expect gearing to normalise in the second half and be below 3.0 times at the year end.

“The capital program was brought forward to prepare our packaging platform to manufacture product containing a high percentage of recycled content. This is in response to the escalating demand we are experiencing for sustainable packaging.” 

Within its packaging and sustainability segment, it reported revenue growth of nine per cent to $661 million and underlying EBIT growth of three per cent to $57 million. 

“The packaging and sustainability segment performed well with growth in both revenue and underlying EBIT. We have more work to do in cost recovery and removing costs, despite this, Packaging Australia’s nine per cent increase in revenue reflects a more stable supply chain towards the end of the half, cost recovery, and increasing demand for sustainable packaging,” Dayal said.

“Packaging New Zealand’s fresh food business reported strong volume growth and its dairy business had record sales in December on the back of a late growing season in New Zealand.

“Our Asian closures business reported mixed results by country reflecting the varying conditions in the region including improved performance in India and Nepal, and a sugar shortage in the Philippines causing a short-term closure of soft drink manufacturing.

“The Recycling business reported revenue growth reflecting strong demand for recycled resin and flake, and our newly acquired Synergy Packaging business performed ahead of plan. We anticipate a strong second half in this segment, primarily in Packaging New Zealand where the later growing season will drive volume growth in the dairy business.”

The materials handling and pooling segment, however, reported a loss of four per cent to $179 million and a decline in underlying EBIT of 35 per cent to $18 million.

“Despite a stable performance in Australia, the materials handling and pooling business was significantly impacted by a downturn and destocking in the US and Europe garment retail sector, in addition to reduced demand from China during COVID lockdowns,” Dayal said.

“Volume in the pooling business was impacted by adverse weather conditions impacting growing regions in Australia and New Zealand.

“We expect improvement in this segment with our Sulo bins business expected to report growth through the second half on the back of significant local council contract wins. We expect recovery in our pooling business with a recent return to stable weather and growing conditions, and we are hopeful of a recovery in the retail accessories business in the fourth quarter as the US and Europe garment retail sectors recover and China rebounds from COVID lockdowns.”

Within its contract manufacturing segment, it reported growth in revenue of 18 per cent to $177 million and underlying EBIT loss of $0.2 million. “These results reflect repricing of contracts and new contract wins, particularly in the health and wellness business. The second half of the year will see the full impact of these contract wins and repricing, and we expect to report positive EBIT in this business for the full year,” Dayal said.

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