Stock Spotlight: Pact Group Holdings Ltd (ASX:PGH)

This week's Stock Spotlight is ASX-listed Pact Group Holdings Ltd.

About Pact Group Holdings Ltd.

Pact Group Holdings Ltd engages in the manufacture and supply of rigid plastic and metal packaging in Australia, New Zealand, Asia, and internationally. The company operates through Packaging and Sustainability, Materials Handling and Pooling, and Contract Manufacturing segments. It offers packaging products for dairy and beverage, bulk packaging, processed food, health and personal care, fresh food, household and industrial, and closures industries; reusable products, such as garment hangers, fresh produce crates, IBC's, and steel drums for supply chain, environmental, infrastructure, and retail accessories applications. The company also recycles post-consumer and post-industrial polyethylene terephathale products comprising water and soft drink bottles, bakery trays, and protein trays into recycled food-grade resins; recycles post-consumer and post-industrial high-density polyethylene products consisting of milk, laundry, and shampoo bottles into recycled resin to manufacture milk and dairy containers, personal and homecare bottles, lubricant containers, pipe, and mobile garbage bins. In addition, it recycles post-consumer and post-industrial polypropylene products that include ice cream tubs, yoghurt containers, shopping, and produce crates into recycled resin to manufacture plant pots, paint pails, bread, milk, produce crates, and bins; and recycles pallet, shrink wrap, and shopping bags to manufacture builders' film, silage wrap, dampcourse, garage bags, and other sheet products. Further, the company offers contract manufacturing services for homecare, hygiene, personal care, health and wellness, cosmetics, automotive, promotional packaging, aerosol, liquid, powder, and nutraceutical products. The company was founded in 2002 and is headquartered in Cremorne, Australia. Pact Group Holdings Ltd is a subsidiary of Kin Group Pty Ltd.

Source: Yahoo Finance

Key Stats

Source: Yahoo Finance, ASX. Data as of 03/09/24.

Growth Potential

• The Company divested 50% of its Crate Pooling and Crate Manufacturing business while retaining the remaining 50%, forming a JV in partnership with global infrastructure investment manager, Morrison & Co.
• Under off-market takeover offer from Bannamon Industries.
• Materials Handling & Pooling delivered revenue growth of +6% to $240.8m as Reuse business experienced growth in demand for mobile garbage bins following capital investment in pcp and revenues in Retail Accessories stabilised.

Key Risks

• Competitive pressures lead to further margin erosion.
• Input cost pressures which the company is unable to pass on to customers.
• Deterioration in economic conditions in Australia and Asia.
• Emerging markets risk.
• Poor acquisitions or not achieving synergy targets as PGH moves to reduce its dependency on packaging for food, dairy, and beverage clients to more high growth sectors such as healthcare.
• Adverse currency movements (purchased raw materials in U.S. dollars)