Lower Guidance Sees Pro-Pac Pummeled

By Glenn Dyer | More Articles by Glenn Dyer

Emerging Melbourne-based packaging company, Pro-Pac shares took a pounding yesterday after it downgraded EBITDA guidance from between $46 million and $47 million to between $37 million and $42 million.

The shares fell 4 cents or 18% to 25 cents, the low for the day.

Directors blamed the lower guidance on “ongoing uncertainty of the drought, energy prices and foreign exchange” with the upper end of guidance “dependent upon a more favourable macro environment”.

The downgrade for 2018-19 followed company announcing revenue results for 2017-18 in line with guidance of $371 million, but a post-tax loss of $5.13 million.

The result includes eight months of trading for Integrated Packaging (‘IPG’) following its acquisition on November 6, 2017 and one off abnormals and write offs of $11.7m stemming predominantly from the acquisition.
Directors a final dividend of one cent a share, unchanged for a year ago for a steady full year payout of 2 cents a share.

The company said that revenue for PPG on a standalone basis was $242 million, up $13 million on the previous corresponding period. "FY18 has seen volumes increase in key industrial, food processing and beverage markets for the Group, but rising raw material costs and the drought have adversely impacted sales and margins,” directors said.

"Underlying EBITDA of $16.1m was in line with the guidance provided while Profit Before Tax (PBT) for the Group was $5.3 million, after adjusting for $11.7 million of one-off items attributed to the IPG acquisition and resulting rationalization, relocation and restructuring costs.

Looking to the coming year, directors said "The recently announced acquisitions of Perfection Packaging and Polypak will enhance the Group’s capabilities to access the higher growth flexible packaging markets and provides further scope for rationalization of facilities and infrastructure and the resultant extraction of synergies in the short to medium term.

"Given the ongoing uncertainty of the drought, energy prices and foreign exchange, the company has updated its FY2019 underlying EBITDA to a range of $37 to $42 million, including acquisitions, with upper end dependent upon a more favourable macro environment.

The board has been changed with former Australia Post chief executive Ahmed Fahour resuming his non-executive chairman role and three new appointmentees: Darren Brown, Leonie Valentine and Marina Go. 

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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