The market gave Pro-Pac the thumbs up for its full year results, with shares rising 6.9 per cent in the first hour of trade yesterday, as its 2019 EBITDA rose by 72 per cent.
For the year Pro-Pac sales increased by 30.8 per cent to $485.8m, while EBITDA rose to $28.1m from $16.3m. The company said revenue and earnings growth was primarily from Polypak and Perfection Packaging acquisitions, and incremental four-month impact of the November 2017 acquisition of Integrated Packaging.
Excluding the contribution from recent acquisitions, sales revenue was down $20m on the previous year, with Rigid Packaging delivering moderate sales volume growth while Industrial Packaging suffered from reduced sales and margin (primarily the food segment) in the second half of the year. Flexibles packaging was impacted by weaker than anticipated sales to the agricultural sector of the market.
Flexibles EBITDA was up by 237 per cent to $18.8m, Industrial EBITDA was down by 39 per cent to $3.7m, and EBITDA for Rigid was up by 27 per cent to $6.6m. EBIT before significant items was up by 80 per cent to $18.8m while NPAT before significant items was up by 148 per cent to $7.7m.
Significant items of $159m sent the company into a statutory NPAT loss of $151.3m. Significant items before tax was a net expense of $163.3m. This included goodwill impairment losses of $149m, and acquisition and integration costs of $10.5m primarily relating to the acquisitions of IPG (2018), Polypak and Perfection Packaging. The company also had business interruption costs of $3.9m including the Kewdale, WA site fire in June.
A stronger EBITDA margin of 5.8 per cent compared to 4.4 per cent last year came despite adverse impact of higher raw material and energy coss in first half of year, and unfavourable foreign exchange movements.
The year saw changes at the top for Pro-Pac following disappointing results in the first half, which saw former Salmat CEO Grant Harrod exit his role as CEO at Pro-Pac. Jonathan Ling was appointed chairman in April, with Tim Welsh becoming new CEO in May.
Welsh said, “Earnings were impacted by the lag in recovering significantly higher raw material input costs experienced in the first half of the year through price increases.
“Importantly, the Perfection Packaging and Polypak acquisitions have performed to our internal expectations and are an integral part of rolling-out our value-added flexible packaging offering,” he said.
The company continues to undergo significant change following the acquisition of IPG almost two years ago. Welsh said, “We continue the transformation journey from being a distributor of general packaging products to a value-add provider of products and services to higher growth segments of the market.”