Close the Loop H2 profits to fall by 50%

Packaging and IT recycling operation Close the Loop anticipates its second half EBITDA will fall by 50 per cent compared to the first half, on revenue that at around $99m will be similar to the first six months.

The adverse impact on its profits is all from its North American operations, while its Australian and South African packaging businesses are performing well, and will, says the company, show a combined single digit earnings growth.

Close the Loop has taken the axe to several Australian projects as it seeks to raise its profitability. The cardboard recycling business in Laverton, Melbourne has been shut down, with management reviewing other operations that are non-core and/or unprofitable. Close the Loop says this decision reflects its focus on optimising its portfolio, and concentrating resources on higher-value, scalable business units.

In addition, Close the Loop has notified both the NSW and Queensland governments that it does not intend to proceed with the construction of new TonerPlas plants in those states in the near term. As part of this decision, the company will return grant funding previously received from the NSW government.

Despite pulling out of these projects, the company continues to accept post-consumer soft plastic from across Australia, and to supply TonerPlas material manufactured in its Victorian facility to meet national demand.

Its North American operations have suffered from a delay in its Mexicali operations commencing. However, that plant is now fully functional. As of June, two printer refurbishment lines are fully operational, and a new line focused on computing and gaming accessories has also been brought online. The company expects a laptop refurbishment line to be operational before the end of the financial year.

The company has also suffered a debilitating computer virus in North America. Close the Loop is currently in the process of appointing a new CEO for North America, with a start date of 1 July anticipated, and says it continues to see long-term growth opportunities in North America.

Six months ago, a proposed $143m takeover of Close the Loop Group by Sydney-based private equity group Adamantem Capital was terminated, since when the company's share price has fallen by 75 per cent.