A significant reduction in volume from a major customer, adverse weather, rising resin costs, and consumers tightening the purse strings, were reasons cited by Pro-Pac for sending it deep into the red in the 2023-24 financial year.
Flexibles revenue was down by 13.3 per cent to $230.1m, while Specialty Packaging fell by 11.8 per cent to $65.1m. To counter the falling numbers Pro-Pac has implemented what it says are “significant” cost reduction initiatives, including releasing 10 per cent of its workforce. It is also working to lower cost/ overhead structures, and says it has improved selling prices.
Revenue from continuing operations was down by 13 per cent to $295.2m, from the $339.1m in the previous year. Losses soared to $53.8m from $8.5m last year. EBIT losses tripled to $15.5m, while the profit before tax figure doubled to a loss of $22.1m. The company added $12.8m to its debt, which stands at $27.8m
Pro-Pac said its major Middle East customer had significantly reduced its volumes required; this was a material change with an impact of more than $17.2 million, of which $12 million occurred in the second half of the year.
It said bad weather had negatively impacted agricultural volumes in both Australia and New Zealand, although the overall volumes in its Flexibles segment (excluding the major customer in the Middle East) were down just a smidgeon, at 0.5 per cent less than last year.
It also cited the impact of pass-through of lower material costs (primarily resin) to customers as a result of price adjustment mechanisms built into contracts as contributing to its losses. Pro-Pac blamed reduced consumer spending as an additional reason for its losses.
It has continued to progress its investments in recycling, with the commencement of a project to build a 15,000 tonnes a year plant to recycle soft plastics in Albury.
The company made $8.4m in payments for plant and equipment during the year, which included a $3.9m on a new printing press, and deposits of $3.2m for equipment associated with the establishment of its soft plastic film recycling plant.
Looking ahead the company says the trading environment “continues to remain volatile and challenging in a high inflationary market”, which has “created uncertainty” around consumer buying patterns.
However, Pro-Pac says it will continue with the process of restoring customer confidence “through better service delivery”, and it says it will undertake aggressive cost reduction programmes to restore profitability.
It says its focus on investment in recycling “will ensure” the business takes a leadership role in the plastics industry around soft plastic recycling and the circular economy.
