Pact Group Holding (ASX:PGH) has announced their FY19 result reporting a net loss after tax of $290m, the share price has fallen 16.5% in response to a price of $2.32.
Pact is a manufacturer of plastic packaging products with a strong presence in Australasia, operating over 110 sites throughout the region. The Company has a diversified consumer base with over 4000 customers in 100 different market segments. The majority of Pacts products are forms of packaging for consumer goods including; beverages, chilled food, household goods and ambient food. However, the Company also provides industrial and transport packaging solutions.
Pact’s loss of $290m for FY19 is a considerable concern for investors, the Company has shut two of their existing facilities in Australia that are planned to be replaced by offshore production. This will increase transport costs and require significant development in the short term, with the company expecting to incur $36m in restructuring costs. Furthermore, the Company has reported an asset impairment of $369m representing a decrease in value of manufacturing assets in Australia.
PGH has also had to contend with increases in raw material and energy costs that have reduced the Company’s earnings whilst demand has also slowed resulting in a 3% decline in EBITDA. As a result, the company is expecting to close a further manufacturing site in FY 2020, expanding Pacts cost structure. As a result of this and the loss reported, Pact has announced they do not plan to distribute a final dividend for FY19, a reduction from the 11.5 cents per security that was paid in FY18.
The appointment of a new CEO and revised strategy may bring future growth to Pact Group Holdings as the Company looks to expand its sustainable operations with “reuse” products, however considerable short-term challenges will need to be overcome.
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