PGH Announces Non-Cash Impairment Charges For 1H FY 2019

Pact Group Holdings Ltd (ASX: PGH) manufactures packaging and other related products. The Company, through its subsidiaries, produces packaging and other products that serve customers in the food, dairy, beverage, chemical, agricultural, industrial and other sectors throughout Australia, New Zealand and Asia.

As per the recent release on the exchange, the company has disclosed that post the evaluation of the carrying value of assets, it has come up to a conclusion that the carrying value shall exceed the realisable value of the assets and thus expects to recognise non-cash impairment charges in the range of $310-$340 million (after-tax) in the Group’s 2019 half-year financial statements. 

The impairment charges recognised is a sign of the competitive and challenging business conditions and a subdued long-term outlook for the Australian geographical business segment. Thus, the same would result in the application of the more conservative assumptions with respect to the growth and discount rates. These impairment charges will be reported in the financial statements of the company as significant items.

The Group also advised to the exchange, that based on the unaudited accounts, the Group expects Earnings Before Interest Tax Depreciation & Amortisation and significant items for the half year ended 31 December 2018 to be circa $110 million. The Group also anticipates the EBITDA for the full year ended 30 June 2019 to be ranging from $230 to $245 million. This likely range is expected to get impacted by the growing uncertainty around the frequency with which revenue and projects can be delivered and the rate with which input cost lags can be recovered.

The group’s Executive Chairman, Mr Raphael Geminder, said that it had been a very tough time for them from the start of this year. The company’s results reflected a significant input cost headwinds and weaker demand conditions in a few of the sectors. These challenges have required the management to evaluate the carrying value of the company’s assets, and disappointingly, this has resulted in impairment losses for the period.

The chairman added that since he has taken the charge of the company, he has focussed upon taking the necessary steps to transform the business to better position us to improve performance and deliver long-term shareholder value. This includes changing the way the management assess and reward performance, reshaping the company’s cost base and progressing with urgency the redesign of the company’s network. Improving the company’s margins and the company’s customer experience remains a key priority.

The Group is slated to release its 2019 half-year financial results on the 20th of February 2019 and remains in a blackout until this time.

Today, the company has also announced the 3 new business reporting segments for the 2019 half-year accounts which would be as follows:

  • Packaging and Sustainability,
  • Contract Manufacturing Services, and
  • Materials Handling and Pooling.

Now, let us have a quick look at Pact Group Holdings Ltd’s stock performance and the return it has posted over the last few months. The stock is currently trading at a price of $3.55, trading down by 9.669% during the day’s trade with a market capitalisation of ~$1.35 Billion. The counter opened the day at $3.70 and touched the day’s high of $3.75 and touched the day’s low of $3.53. The stock has provided a YTD return of 16.96% & also posted returns of -25.85%, 7.08% & 10.08% over the past six months, three & one-months period respectively. It had a 52-week high price of $ 5.950 and touched 52 weeks low of $ 3.050, with an average volume of ~903,304.


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