Struggling Melbourne packaging group, Pact is putting its contract manufacturing division up for sale to relieve the pressure on the company’s finances by raising enough cash to pay down debt.
Pact’s contract business includes Jalco, Pascoe’s and Australian Pharmaceutical Manufacturers. They package groceries, cosmetics, and household goods for brands and supermarkets.
The possible sale of the business has been on the cards for the past 8 months.
The businesses include manufacturing capability for powders, liquids, aerosols and therapeutic nutraceutical product, broad product portfolio including laundry detergents and softeners, home cleaning products, insecticides, skincare products, hair care products, vitamins, and supplements
Pact has not put a price on the business but says it reported sales of $372 million in 2018-19 with earnings of $25 million.
Chief executive Sanjay Dayal said in Tuesday’s statement that the sale will “restore margins in the core packaging business”
“Divesting Contract Manufacturing will simplify the portfolio and sharpen our focus on driving improved returns in the remaining group. Importantly, divestment will strengthen our balance sheet and improve our financial flexibility,’’ he told the market in a statement.
Pact said it will provide further details of the strategy review in February with its FY20 Half Year Results.
Pact shares rose 3.3% to $2.78 in a market that ended down 13 points yesterday.