Investments in 2017 have delivered leading positions for Pact Group in new growth sectors like contract manufacturing, which now represents 20% of the group's revenue.
At the results announcement on 16 August, Pact MD and CEO Malcolm Bundey said that 2017 was a "transformational year" following investment of over $200 million in new growth initiatives, which have transformed Pact's product and service portfolio in sectors offering attractive growth opportunities.
The first of these is contract manufacturing, where, following a series of recent acquisitions (Jalco [last year], APM and Pascoe's), the group is now a leader for the health and wellness and non-food FMCG sectors in Australia.
"Contract manufacturing moves us from a component manufacturer to an integral part of our customer’s supply chain. This is a service portfolio we did not participate in two years ago, which now represents over 20 per cent of group revenue," Bundey said.
The company has also moved into top spot as supplier of crate pooling services for fresh produce in Australia and New Zealand.
"Our growth in this sector is largely organic, enabled by our demonstrated service capability, significant innovation and customer focus."
The company's new crate pooling business in Australia (Viscount Pooling Systems), the establishment of which involved a $59m investment in this FY, commenced on schedule this month to support fresh produce supply to Woolworths.
“In the year, we also invested in new rigid packaging capability in sectors we believe have attractive growth opportunities. This included investment in a world-class clean-room facility to expand our capacity to meet growth in the health and wellness sector.
“These sectors are expected to deliver higher growth over the longer term than some of our more mature rigid packaging
sectors. Maintaining a strong position in our core sectors while diversifying into these higher growth sectors through acquisition is fundamental to our strategy,” Bundey said.
“We have remained keenly focused on the future. Our investments in 2017 provide solid pathways for future growth.
"Whilst demand conditions across some sectors in which we operate remain subdued, we believe our strategy will continue to drive growth. We expect to achieve higher revenue and earnings (before significant items) in FY2018, subject to global economic conditions," Bundey said.
The results highlights are summarised below:
- Sales revenue up 7% to $1,475.3 million
- EBITDA before significant items (1) up 6% to $233.1 million
- EBIT before significant items (1) up 4% to $169.4 million
- NPAT before significant items (1) up 6% to $100.0 million
- Strong earnings growth from acquisitions
- Efficiency benefits of $16 million delivered in the period
- Continued strong cash generation and a robust balance sheet - gearing of 2.8x and interest cover of 7.7x
- Total dividends of 23.0 cents per share, up 10%
