Wednesday 13 November 2019

Ardagh shares hit fresh lows after sluggish results

Fall guy: Ardagh executive chairman Paul Coulson's stake in the firm was worth around $1bn as the shares hit a new low after its flotation
Fall guy: Ardagh executive chairman Paul Coulson's stake in the firm was worth around $1bn as the shares hit a new low after its flotation
Gavin McLoughlin

Gavin McLoughlin

Cost inflation weighed on Ardagh Group's results for the third quarter, with the company cutting its profit guidance and seeing shares plough fresh lows.

Adjusted ebitda (earnings before interest, tax, depreciation and amortisation) fell 9pc year-on-year in the quarter to $400m (€350m). Revenue was up 3pc year-on-year to $2.39bn.

The company cut its full-year adjusted ebitda guidance to a range of around $1.45bn-$1.475bn, from a previous guidance of around $1.5bn.

Bottle and can maker Ardagh is run by executive chairman Paul Coulson, who owns around 33pc of the business.

His stake is held via a holding company which owns 92pc of Ardagh, with just 8pc of the listed entity's shares in free float.

Mr Coulson has previously outlined plans to increase the free float. Part of that involves repaying and refinancing significant levels of debt issued by the holdco, which has some $2bn of bonds outstanding.

But that refinancing may prove more difficult if the holdco's Ardagh stake is worth less because of share price falls.

Shares hit an all-time low yesterday since the PLC's flotation in March 2017. The company was downgraded by Standard & Poor's recently, citing concerns about the high debt level across both the PLC and the holdco.

At 5pm Irish time the company's market capitalisation was some $3.2bn - putting Mr Coulson's stake at around $1bn without including debt.

The company said yesterday it was committed to deleveraging and wants to cut the PLC leverage from the current 5.3 times adjusted ebitda to 5 times at the end of the year.

Mr Coulson said: "In a period marked by high levels of cost inflation, third-quarter earnings reflected strong growth in Metal Packaging Americas, with all parts of that business performing very well.

"In Europe, we recorded good growth in glass packaging during the quarter, while our metal packaging business was adversely impacted by a weak food harvest.

"In Glass Packaging North America, our footprint adjustments and other initiatives to rebuild profitability continued against a challenging market backdrop. We remain focused on cash generation and deleveraging over the final quarter and into 2019." He told analysts that Donald Trump's tariffs on Chinese glass container imports were "a welcome first step in moving towards a more level playing field".

Last month, Mr Coulson told an audience in Dublin that the company was considering increasing automation at its US plants on foot of labour difficulties.

He said the company has encountered problems with the labour pool - including drug use, with the country in the grip of an opioid crisis.

"The US is a great market but it has its issues. Its economy is growing so well that it's pretty much, in many places, at full employment. And if you talk to a number of industrialists and people who are manufacturing in particular - it's actually quite difficult," Mr Coulson said.

"The labour pool is difficult. It's difficult to get people who are drug-free, etc, etc, and to train people. We're having to put a lot of emphasis and investment into training people and retraining people because it's difficult to get people. Also labour costs in some areas are quite high."

He said high healthcare costs are one of the reasons for that.

"I think one of the things you'll see, and certainly one of the things we have to look at because of the issue on labour cost and labour availability, is more automation of our plants," Mr Coulson added.

Irish Independent

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