Insights

Pact Group Holdings (ASX:PGH) share price jumps 8% on FY21 earnings

The packaging solutions company has doubled its previous final dividend.
The post Pact Group Holdings (ASX:PGH) share price jumps 8% on FY21 earnings appeared first on The Motley Fool Australia. –

The Pact Group Holdings Ltd (ASX: PGH) share price is soaring 8% higher today after the company released its results for financial year 2021 (FY21).

At the time of writing, the packaging company’s shares are trading for $4.33, a jump of 8.52% on Tuesday’s closing price.

Pact Group share price up on 100% dividend increase

Here’re Pact Group’s FY21 earnings:

Around $1.76 of revenue ­– 3% less than FY20
Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of $314 million – a 4% increase
Net profit after tax of $93.5 million, $20.3 more than in FY20
$29 million reduction in debt
65% franked 6-cent final dividend. The company’s total FY21 dividends are 11 cents per share.

The company also announced its final dividend had increased by 100%. In FY20, Pact Group’s final dividend was just 3 cents and it didn’t provide an interim dividend.

Pact Group’s net financing costs for the financial year were $51.2 million, $11.6 million less than those of FY20. The company stated the reduction was due to lower interest rates and debt levels.

Additionally, the company stated it hadn’t been materially disrupted due to COVID-19.

Pact ended the period with around $62 million of cash and $585 million of debt.

What happened in FY21 for Pact Group?

Here’s what likely drove the Pact Group share price during FY21:

Pact Group’s big news from FY21 was its acquisition of New Zealand-based plastic manufacturer Flight Plastics, which it completed in January.

Additionally, the company had a number of contract wins in the packaging and infrastructure sectors over the period. It also increased its business in the fresh produce sector.

Finally, in August 2020, Pact entered a joint venture with Cleanaway and Asahi Holdings. The joint venture will recycle PET bottles to produce new food and beverage packaging in Australia.

What did management say?

Pact Group’s managing director and CEO Sanjay Dayal commented on the results driving the Pact share price higher:

These results demonstrate the great progress we are making in the delivery of strategy and our vision to lead the circular economy.

Improvements in the company’s performance have been underpinned by the delivery of strategy. I am pleased with the progress we are making.

Operations in our Australian packaging business have stabilised, and margins are improving. Our new operating model, strong leadership, and investment in platform capability, are delivering improvements in operational performance, safety, quality, and delivery. We have developed detailed segment strategies which are guiding our investment decisions and will continue to drive growth in margins. We are targeting to return margins in our Australian packaging business to global industry standard by 2025.

What’s next for Pact Group?

According to Pact, FY22 will see it improving its resilience, an outcome that would likely reflect positively on the company’s share price.

Pact expects the first quarter of FY22 to bring demand in line with recent trends. Although, it believes its margins will be hit with higher raw material and international freight costs.

The company will provide an update on trading at its annual general meeting on 17 November.

Additionally, the company’s expecting its Albury PET recycling facility to begin commissioning in the first half of 2022.

Pact and Cleanaway have also recently announced a plan to build a new plastics recycling facility in Victoria. Construction on the facility is expected to begin in late 2021 and operations there are expected to start in December 2022.

Additionally, Pact, Cleanaway, Asahi Beverages and Coca-Cola Europacific Partners have agreed to form a joint venture to build a new PET recycling facility. The joint venture’s facility is expected to be complete by 2023.

Pact is also evaluating a new plastic recycling facility in WA, which would be supported by government funding.

Pact Group share price snapshot

The Pact Group share price has gained 63% year to date. It has also increased by 82% since this time last year.

While the company’s shares are currently swapping hands for $4.33 apiece, earlier today they hit a multi-year high of $4.36.

The post Pact Group Holdings (ASX:PGH) share price jumps 8% on FY21 earnings appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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