Raphael Geminder’s Pact Group hungry for more acquisitions

Looking for growth: Pact Group chief executive Brian Cridland. Photo: Josh RobenstoneAustralia’s biggest plastic packaging manufacturer, Pact Group, says it has a “sizeable pipeline” of acquisition opportunities as the company aims to deliver higher returns to shareholders in the next year.
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Pact, which is controlled by billionaire Raphael Geminder, posted a 17 per cent jump in full-year net profit to $67 million, while revenue leapt 9.3 per cent to $1.25 billion.

Pact chief executive Brian Cridland attributed the gains to the company’s aggressive acquisition strategy.

That has included snapping up Barry Smorgon’s Jalco, and the Sulo and Cinqplast businesses.

He said without acquisitions, the company’s growth would be at a similar rate to Australia’s economy.

Mr Cridland said Pact had a “strong pipeline” of businesses on its shopping list to help deliver higher returns to shareholders.

“I wouldn’t say we are a machine, but we are a highly energetic acquirer of businesses that’s practised at integrating them and getting more out of them than what they did before,” Mr Cridland said. “Look to the past and that’s what you’ll get in the future.

“The markets that we service are not highly volatile like the mining industry. Our existing business can and does have organic growth but it is at the GDP level.

“We superimpose upon that our initiatives and our actions in mergers and acquisitions and our growth in total will be much higher.”

Despite delivering higher revenue and profit, the company’s shares slumped as much as 5 per cent to $4.17 on Wednesday, albeit on thin volumes, compared with the broader market dipping as much as 1.7 per cent.

Mr Cridland declined to name the deals it was in the process of making, citing confidentially.

The company was set to formally take over Jalco, a fast-moving consumer goods manufacturer it bought for $80 million in June.

“That’s an example of one that was in the pipeline, and there is a sizeable pipeline of opportunities like that, that we are working on.”

Pact Australia’s sales rose 8.2 per cent to $890 million, which Mr Cridland attributed to the contribution of Sulo, a waste and recycling bin maker it bought for $34.8 million in August 2014.

Pact International’s revenue also was higher, rising 12.1 per cent to $359 million.

Mr Cridland said increased sales from Sulo New Zealand and favourable currency swings were partially offset by softer agriculture sales across the Tasman and weaker demand from industrial customers in China.

However, he was unconcerned about Pact’s Chinese customers “pulling back quite savagely” and the uncertainty surrounding the country’s economy.

“Our Chinese business in the scheme of things is very small. I could argue that it’s sort of irrelevant,” he said.

“But if we were to do more in China, it would be in the consumer market. Our industrial customers are pulling back and pulling back quite savagely . . . the consumer in Asia is a different matter.

“We haven’t seen any adverse effect on that to date. Were it to occur in the future, that would be [a] problem.”

Pact generated earnings per share of 23¢, compared with 35¢ in the 2014 financial year.

The company will pay a final dividend of 10¢ a share – a 5.3 per cent increased compared with 2014 – on October 5.