The Pact Group Holdings Ltd (ASX: PGH) share price ended 1.63% higher today following the release of the packager's half-year earnings result.
Pact Group is a provider of specialty packaging solutions, servicing both consumer and industrial sectors throughout Australia, New Zealand and Asia.
Challenging market conditions see a decline in revenues
Pact Group's revenue for the half-year came in at $885 million, 3.3% lower than the $915 million achieved in the prior corresponding period (pcp). The company commented that lower overall net volumes and lower pricing were partly offset by favourable foreign exchange translation benefits.
Pact Group recorded a statutory net profit after tax of $35 million for the half-year, which included a significant gain after tax of $2 million. However, excluding the impact of the adoption of AASB 16, net profit after tax before significant items came in at $37 million, up 4% compared to $36 million in the pcp.
Earnings before interest, tax, depreciation and amortisation (EBITDA) of $145.4 million came in $35.3 million higher than the pcp, including a positive impact of $32.8 million from the adoption of AASB 16.
Pact Group said there will be no interim dividend this period, with cash to be retained to fund strategic initiatives and reduce debt.
Segment review
The company's growth in the Materials Handling and Pooling segment was driven through the expansion of crate pooling operations in Australia.
The company noted that its Packaging and Sustainability volumes continued to experience challenging trading conditions in a number of sectors. This more than offset modest volume growth experienced in New Zealand and Asia.
Pact Group also noted that contract Manufacturing Services volumes were significantly lower in its health and wellness sector, and also softer in the homecare and personal care categories.
Outlook for the remainder of FY20
Commenting on FY20, Pact Group acknowledged that the potential impact on sales and supply chains from further disruption related to the coronavirus outbreak and other macro-economic factors is uncertain at this time.
The company went on to state that the outcome of the proposed sale of Contract Manufacturing Services, along with its impact on FY20 earnings, is not yet known.
Excluding Contract Manufacturing Services, Pact Group expects EBITDA from its continuing operations for FY20 to be generally in line with FY19, subject to global economic conditions.
