Pro-Pac in loss for year, rights issue taken up

As institutional investors gave a thumbs up to its rights issue, Pro-Pac Packaging (PPG) revealed it suffered a $25.9m NPAT loss in the 2021/22 financial year, on sales that rose by eight per cent to $403.9m.

The statutory profit after tax figure includes the operating profit of the Rigid business, which had a profit before tax of $3.9m, and the profit on the sale of the business of $20.9m. It was sold just before year’s end, on 24 June.

Continuing operations at Pro-Pac following the Rigid sale include the Flexibles packaging business, and Industrial Specialty Packaging.

Its Flexibles revenue increase of $19.4m, or 7.5 per cent, to $279.5m, was driven by increased prices of $9.2m, and higher volumes, which added $10.2m.

Profit before tax and EBIT both fell into the red, EBIT fell from a profit of $22.2m last year to a loss of $0.7m, while profit before tax fell to a $2.7m loss, from a profit of $19.9m in the previous year.

The company attributed its decrease in profit of $22.6m to increased raw material costs of $27.3m, increased freight and distribution costs of $4.7m, and increased overheads $3.2m, which include increased fixed costs from the new conversion factory at Monash Road, Dandenong South

Industrial Speciality Packaging revenue increased, primarily due to what the company says was Source and Sell increased revenue. Revenue was up by 11 per cent to $124.4m, with both EBIT and profit before tax scraping into the black at $1.6m and $1m respectively.

The Rigids revenue for the year, with a week to go before it was sold, was $5m down on previous year at $63m, with EBIT down by 10 per cent to $4.5m.

The company says its key growth initiatives include improving the performance in the newly established printing and conversion facilities in Dandenong, particularly in regard to machine and labour efficiency. It is also seeking to improve the performance and effectiveness of the new ERP system in the sites where commissioning has occurred, before rolling out to additional sites.

It says its recently installed investments will generate revenue growth. These include the seven-layer extruder at Reservoir factory, and eight-colour printer at Dandenong, new capacity at Regency Park, and a new laminator at Dandenong.

Pro-Pac says its key priority is to return the flexibles business back to the profitability it achieved in FY21, and to reduce its corporate overheads. It expects that resin costs will continue to stabilise, albeit at record high levels. It also expects that cost increases across most spend categories will continue and, in particular energy costs.

Institutional shareholders took up 97 per cent of the company’s entitlement offer, with the broker set to auction off the remaining 2.3 million shares. Retail investors have until 6 October to accept or reject the renounceable rights offer, which will raise $30.2m in total for Pro-Pac. The funds will be used by Pro-Pac to pay down its $21m debt to its bankers, with the remaining cash to be applied to provide additional financial flexibility, and support the working capital requirements of the business.