Release Date: February 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant improvement in safety performance with LTIFR reduced from 10.96 to 8.31.
- EBITDA pre-AASB 16 improved to $1.2 million from a negative $0.8 million in the prior period.
- Continued focus on innovation and product development, including investments in new equipment like the color printing press.
- Strong commitment to recycling and the circular economy, supported by a $13.9 million federal government grant.
- Improved service quality and delivery levels, leading to new customer wins and better business development opportunities.
Negative Points
- Revenue decreased by 13.3% to $158.9 million due to lower raw material costs and reduced volumes.
- Challenging trading conditions with reduced consumer spending and adverse weather impacting agricultural sales.
- Net debt increased from $8.9 million to $17.3 million, excluding government grants.
- Higher operating costs due to increased input costs and a high inflationary market.
- Ongoing challenges with labor availability and higher-than-average absenteeism.
Q & A Highlights
Q: Volumes declined by approximately 8% in the first half of '24. Were the volumes lower throughout the first half of '24, or did they deteriorate towards the back end of the half? And how should we think about volumes in the second half of '24?
A: Thanks, David. A fair proportion of the 8% decline has been around our agricultural volumes, both across Australia and New Zealand. These are more seasonal-related volumes rather than underlying volumes. For the second half of '23/'24, we expect volumes to be at or above last year's level. - John Cerini, CEO & MD
Q: When do you expect to receive the remaining cash from the federal grant? And what does the CapEx cost schedule look like for the soft plastics recycling facility?
A: Most of the early investment stages are going into the building, funded by Kin Group, who will be the ultimate landlord of the site in Albury. Progress payments are covered by the grants in the first two phases. I don't expect significant cash flow out the door related to PPG itself in calendar year '24. - John Cerini, CEO & MD
Q: Can you talk about how labor availability has changed over the last few months?
A: We are still seeing higher than long-term average absenteeism, somewhat an effect of COVID. However, the availability of trained staff or technical staff is improving, and we don't have any outstanding positions that we can't fill with qualified people. - John Cerini, CEO & MD
Q: What are the main factors contributing to the revenue decline of 13.3% for the half year?
A: The revenue decline is primarily due to the pass-through of lower raw material costs, mainly resin costs, to customers under contract pricing mechanisms, and the loss of volume in industrial and agricultural films. - Domenic Romanelli, CFO
Q: How has the company's safety performance improved?
A: Our LTIFR at December 31, '23 was 8.31, a reduction from 10.96 as at June 30, 2023. We anticipate further improvements as we focus on lead indicators to drive improvement and continue to implement actions to prevent similar injuries from reoccurring. - John Cerini, CEO & MD
Q: What are the expectations for EBITDA pre-AASB 16 for FY24?
A: Given the current trading environment and following a disappointing January, we expect to be around breakeven EBITDA pre-AASB 16 for the FY24 year. - John Cerini, CEO & MD
Q: How is the company addressing the challenging trading environment?
A: We are focusing on reducing costs, improving service quality and delivery levels, and driving business development through innovation and sales growth opportunities with new and existing customers. - John Cerini, CEO & MD
Q: What are the company's plans for the soft plastics recycling facility?
A: We are developing a soft plastics recycling facility with a $13.9 million grant from the federal government's modern manufacturing initiative. The project is moving ahead quickly, with development applications and agreements with major suppliers in progress. - John Cerini, CEO & MD
Q: How has the company's financial performance improved compared to the previous period?
A: EBITDA pre-AASB 16 for the half year from continuing operations was $1.2 million, an improvement from the prior corresponding period of negative $0.8 million, reflecting the benefits of cost reduction programs. - Domenic Romanelli, CFO
Q: What is the company's strategy for future growth?
A: We will continue to focus on innovation, operational efficiencies, and cost reduction. Recent investments in new equipment will allow us to grow volumes when the market rebounds without the need for further significant capital spend. - John Cerini, CEO & MD
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
