Raphael Geminder’s Pact Group reinstates dividend as profit meets guidance

Raphael Geminder’s company reinstated its dividend after a two-year hiatus, as “panic buying” put a floor under earnings.

Pact Group, the packaging company controlled by Melbourne billionaire Raphael Geminder, has reinstated its dividend — with COVID-19 panic buying offsetting weakness in the fashion retail sector — as the manufacturer rebooted plans to sell its contract manufacturing business.

Pact, the nation’s largest manufacturer of rigid plastic packaging, delivered a 1.3 per cent rise in full-year 2020 earnings before interest, tax, depreciation and amortisation of $233m, up slightly from last year’s $231m, and meeting guidance issued in February for its performance to be on par with 2019.

Its underlying net profit increased 4.5 per cent to $80.8m, from $77.3m, while earnings at its packaging unit fell 10.9 per cent to $137.8m. But it recorded gains in its materials handling and contract manufacturing divisions.

Dividend payouts will be resumed after a two-year hiatus, with a final return of 3c per share.

The sale of its contract manufacturing business, which had been put on ice due to COVID-19, will also be restarted. The unit is a dominant supplier of contract manufacturing services in Australia for the home care, personal care and health and wellness segments and includes the combined businesses of Jalco, Pascoe’s and Australian Pharmaceutical Manufacturers.

The Melbourne-based manufacturer said the bulk of its business remained resilient through COVID-19 lockdowns, with high supermarket demand including “panic buying” during the earlier stages of the pandemic, and hygiene and home care segments also strong. It called out kiwifruit trays in New Zealand as a drag on performance, with packing restrictions requiring fruit to be delivered loose to supermarkets.

It also warned of challenging volumes in its Australian packaging business, with easing drought conditions offset by the impact of summer bushfires. Pact expects trading in the first quarter of the 2021 fiscal year to be in line with recent trends.

Demand for its clothes hanger reuse business was “well down” during the period, while Pact received $700,000 in wage and property rent relief in Australia from a $2.8m total for the group.

Chief executive Sanjay Dayal said a strategic review was progressing amid plans to target top quartile shareholder returns, hitting 30 per cent recycled content across its portfolio by 2025 and boosting its regional scale.

Mr Geminder is the chairman and 40 per cent owner of Pact.