Pact Group investing for commanding position in recycling

Pact Group’s transformation into a major player in the circular economy continues apace with big plans for plastics recycling.

Pact Group managing director Sanjay Dayal at their Villawood operations.

Pact Group is envisaging a multistate network of plastics recycling plants built in collaboration with industry partners, after striking deals with major players such as Coca-Cola and Asahi.

The packaging and recycling company 44 per cent owned by billionaire Raphael Geminder – No.104 on the latest The List: Australia’s Richest 250 – on Wednesday reported a 1 per cent fall in full year net profit to $87.5m, on revenues of $1.76bn, down 3 per cent.

The underlying profit was 28 per cent higher than last year’s result, with one offs including restructuring costs of $6.2m and $4m in costs associated with a factory fire affecting the figure attributable to shareholders.

Pact Group declared a 65 per cent-franked final dividend of 6c, doubling last year’s final payout. The company’s shares responded positively to the results, trading more than 7 per cent higher at $4.27.

Companies such as Coca-cola are being called on to be part of waste management solutions.

The company said Covid-19 had caused supply chain disruptions, an increase in shipping costs and difficulties hiring people offshore, however managing director Sanjay Dayal said while it was challenging, the company’s local operations had strong protocols around staff safety which had ensured disruption was kept to a minimum.

Mr Dayal said that over the past 18 months the company had been implementing a strategy to become a major player in the circular economy, and to that end, had recently announced joint ventures with Cleanaway and separately just this week, Coca-Cola Europacific Partners and Asahi Beverages to build two new plastics recycling facilities.

These would add to the company’s $45m Albury PET recycling plant which is set to come online before the end of the year, with the capacity to recycle about a billion plastic bottles annually.

The proposed $38m Cleanaway joint venture at Laverton in Victoria would recycle a similar tonnage of mainly HDPE plastic while the $50m project with Coca-Cola and Asahi would be of a similar size to the Albury operation.

A location for the latter joint venture, which would be one third-owned by each partner and is currently at the memorandum of understanding stage, is yet to be announced.

The company is also examining potential projects in Western Australia, backed with a $9.5m government grant, and one in Queensland.

READ MORE: Geminder weighs McPherson’s options

“My ambition is to have a plant in WA and also a plant in Queensland,’’ Mr Dayal said.

Mr Dayal said the smaller markets could be more challenging because there was less raw material feedstock, but the company was working collaboratively with the governments in both states on which solutions could work in those markets.

Mr Dayal said the key to building out a viable network of recycling facilities was having both a supply of waste, as well as an end user, meaning the company’s relationships with Cleanaway and the beverage firms was vital.

And there was a strong consumer-led push for companies in the fast moving consumer goods realm to be a part of the waste solution.

“The big multinationals, they all see this as the path forward,’’ he said.

“If you take Coca-Cola in Europe they see this already being played out, similarly in the US.

“They’ve got their own targets in the Australian geography so they need to hit (those), they need to position themselves as environmentally friendly as they are the ones who are customer-facing.

“They are solving their problems and we are driving our strategy.’’

The company is still seeking a buyer for its contract manufacturing business which makes products including hand sanitisers. Before tax earnings in that division fell 24 per cent year on year as demand normalised after a Covid-related spike in the previous period.

On the outlook, the company said it expected demand to be “generally in line with recent trends, though margins will be impacted by higher raw material and international freight costs’’.

Pact said Covid-19 “continues to create market uncertainty” and it would provide a further trading update at its annual meeting on November 17.