• Challenging start to year: Raphael Geminder, executive chairman, Pact Group
    Challenging start to year: Raphael Geminder, executive chairman, Pact Group
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Shares in Pact Group plunged by 17 per cent to a record low on the company's half year figures, as executive chairman Raphael Geminder told investors, “We've not done a great job.”

The plummeting share price comes hard on the heels of last week's steep sell-off, when the company revealed a $340m asset write down. Shares have fallen from $3.93 last Monday to $2.58 today.

Pact net profit after tax in the half year to December was down by 29 per cent compared to the same period in 2017, to $36m, on sales that rose by 13 per cent to $915m. However, the rise was largely driven by the Asian acquisition, undertaken in the second half of FY2018, and the acquisition of TIC Retail Accessories, completed 31 October last year. Underlying revenue was up one per cent versus the prior corresponding period.

EBITDA before significant items was down by nine per cent to $110m. Its statutory NPAT was a loss of $320m, thanks to the asset write down. The company will not provide a share dividend for the half year. The Group expects EBITDA for the full year ending 30 June to be in the range of $230m to $245m.

The company said it had been impacted by rapidly increasing raw materials and energy costs and weaker demand. Geminder said that the drought had also hit sales, and said the market overall was subdued in the dairy, food and beverage packaging business. By contrast contract manufacturing volumes were stronger, largely due to growth in demand in the health and wellness sector.

Geminder also cited cheap imports, and the high cost of doing business in Australia as factors in the profit slide.

Pact remains without a CEO following the sudden resignation of former incumbent Malcolm Bundey six months ago. Geminder himself has been running the company since then.

On the results Geminder said, “It has been a challenging start to the year. Our results reflect significant input cost headwinds and weaker demand conditions in some sectors. These challenges have required us to reassess the carrying value of our assets, and disappointingly, we have recognised impairment expenses in the period in relation to assets in our Australian business.

“These ongoing challenges have required us to respond with decisive action. We are accelerating our steps to transform the business and to better position us to improve performance to deliver long-term shareholder value. Our new operating model will increase transparency and the way we assess performance. Improving our margins and our customer experience is a key priority.

“We are progressing with urgency the transformation of our network and are reshaping our cost base. We have made significant progress in the network redesign program during the period with three additional plant rationalisations, that will be largely finalised by the end of H219. Despite the short term pain, pleasingly we have started to improve our cost base through our efficiency initiatives.

“In demonstrating a disciplined approach to capital management, the Board has determined that an interim dividend will not be paid, with operating cashflows retained to invest into critical efficiency and growth initiatives. “

“This includes an investment to grow our asset pooling services business, following a new contract win with Aldi. The contract, expected to commence late in 2019, represents an exciting growth opportunity for our Australian pooling business. It is testament to the success our pooling business has already demonstrated in providing world class innovative pooling services for fresh produce supply in Australia.

“It has been a challenging start to the year, and this is reflected in our earnings. Despite this, we have remained steadfastly focused on delivering change and leveraging our market leading platform to deliver long-term shareholder value.”

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