Flexibles and specialty packaging business Pro-Pac Packaging (PPG) saw its losses increase in the first half of the year, and has called in advisors for a strategic review of the business.
The advisors will also explore and execute on plans for improved profitability, and longer term funding arrangements. CEO and managing director Ian Shannon said, “The current trading results continue to perform below our expectations.”
Among Pro-Pac’s challenges in the half year were a tightening market, adverse currency exchanges, and a dramatic decline in sales to its major Middle East customer, which alone left a $13.6m hole in revenue. Excluding that hit, volumes in the Flexibles business were still down by three per cent, which Shannon said were, “reflective of the challenging market conditions and weather conditions in Australia and New Zealand which impact on our agricultural volumes.”
Revenue for continued operations was down by 10.1 per cent across the group, at $142.9m, while losses (profit before tax) were in the red to the tune of $12.8m, some $7.3m more than the corresponding period in the prior year.
EBITDA (pre AASB16) also slipped into the red, falling by $7.6m to a loss of $6.4m, although that was a slightly better result from the immediate prior period of the second half of the previous financial year of an $8.7m loss.
Flexibles revenue for the half year, which the company described as “a difficult trading environment”, fell by 12.8 per cent compared to the same period in the previous year, falling from $124.5m to $108.6m, while EBIT losses more than tripled, hitting $10.1m, compared to $3m in the prior corresponding period.
Volumes in the Specialty Packaging business were up 0.6 per cent (excluding exited market categories), but revenue was down by 0.6 per cent, to $34.2m, with EBIT improving by 50 per cent, up to $1.8m.
Looking ahead the company says market conditions and exchange rate movements continue to be challenging, and will impact expected results in the second half. It says EBITDA will be below the 2024 figure.
Pro-Pac operates out of 12 sites across Australia and New Zealand, with 500 staff. The company has been awarded a grant of $13.9m to build a $50m+ facility (including building and development costs), receiving $10.5m in grant funding to date, with $3.2m paid in deposits on equipment.
The grant was received from the federal government’s Modern Manufacturing Initiative to establish a soft plastic film recycling plant and create a circular economy for the plastic waste, through the development of recycled raw materials which can be used in packaging films and products manufactured by PPG and its business partners.
Discussions with interested industry collaboration partners is currently being undertaken, to establish a consortium of equity and sponsor parties to optimise the collection of feedstock, processing of waste plastic films, and the offtake of manufactured products with recycled content.
Pro-Pac said that as a result of delays in regulatory and local council approvals, the completion date of project is not expected in line with the original government grant agreement. The group said it is working closely with the government in relation to the future milestones and requirements of the project, to ensure compliance with the terms and conditions of the grant.
