Ardagh slides to a loss amid $186m North American glass charge

Glass bottle and metal containers giant Ardagh Group, led by Irish financier Paul Coulson, swung into a net loss of $94 million (€83 million) last year after booking a charge against its North American glass unit as it grapples with weakness in the US mass beer market.

The New York-listed group said on Thursday that it took an impairment charge of $186 million in respect of goodwill in its Glass Packaging North America unit. It had posted a $63 million profit in 2017.

“The impairment charge primarily arises as a result of a challenging market backdrop of continuing reductions in demand and volumes of glass packaging for domestically produced mass beer brands as a result of the growth in consumption of imported beer,” Ardagh said in its annual report.

“The decline in mass beer continues and the group has undertaken a comprehensive review of our capacity, transportation, logistics and supply chain, and implemented measures to improve future performance in order to ensure that the business once again performs in line with our expectations.”

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Earnings before interest, tax, depreciation and amortisation (Ebitda) – a gauge more closely followed by analysts – declined to $1.478 billion from $1.508 billion. However, the figure was marginally ahead of the top end of its most recent forecast of $1.475 billion.

New York-listed Ardagh, in which Mr Coulson effectively owns a 33 per cent stake, downgraded its 2018 Ebitda forecasts twice last year amid problems in its US glass division, currency fluctuations and a weak European food harvest, which affected its metal packaging unit on this side of the Atlantic.

Chairman and chief executive Mr Coulson forecast that ebitda this year would be at least $1.5 billion.

The group’s revenues topped $9 billion last year, compared with $8.6 billion in 2017, as it serviced more than 2,000 customers across more than 100 countries, comprising multinational companies, large national and regional companies and small local businesses.

Closures

Last month, Ardagh said that it planned to close a second US glass-container plant in a little over a year, saying the move would "further enhance" the company's competitiveness and "optimise" its capital investments. The latest move will see production cease at its Lincoln, Illinois facility, which employs about 150 people, at the end of April.

Ardagh closed a beer bottle plant in Milford, Massachusetts last March, resulting in the loss of 250 jobs, while it cut production in half at a facility in Louisiana, leading to further layoffs.

The group reported $57 million of restructuring costs last year, up from $38 million in 2017, with the majority of the latest provision set to be paid out over the course of this year.

Shares in Ardagh have fallen by almost a third since the company floated in the US almost two years ago.

Some 92 per cent of Ardagh is held by a holding company, whose investors include Mr Coulson, managers and high-net-worth individuals. The group said 12 months ago it planned to “materially” increase the amount of tradable stock by giving investors in the unlisted holding company direct stock in the publicly quoted business.

Mr Coulson told analysts on a conference call on Thursday that this remained the target, but that it might be 2020 before it was executed. Chief financial officer David Matthews said the focus remained on growing earnings and lowering the burden of the group’s debt burden. Net borrowings stood at $7.46 billion at the end of December.