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What Pact Group Holdings $290 million Loss Means for Investors?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

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.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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