Ardagh swings into profit amid $1.5bn gain on food cans spin-off

Ardagh Group, the glass and metal containers maker led by Irish financier Paul Coulson, swung into profit last year as it recorded a $1.53 billion (€1.4 billion) gain from a deal to spin off its food and specialty cans business.

The transaction pushed the company into a net profit of $1.46 billion for the year from a $94 million loss for 2018, the New York-listed company said in its full-year results, published on Thursday.

Ardagh, effectively 33 per cent owned by chairman and chief executive Mr Coulson, completed a deal last October to fold its food and speciality business into a joint venture called Trivium, controlled by Ontario Teachers' Pension Plan Board. Ardagh received $2.5 billion in cash as part of the transaction as well as a 42 per cent stake in Trivium.

Ardagh’s continuing business is focused on glass bottles and beverage cans.

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The company forecast that its before interest, tax, depreciation and amortisation (ebitda) will rise 2.3 per cent to $1.2 billion (€1.1 billion) this year – about half the pace of growth recorded for 2019.

Ebitda, which is the earnings line most closely followed by analysts and Ardagh’s creditors, grew by 5 per cent last year to $1.17 billion last year, and would have advanced by 8 per cent had it not been hit by currency fluctuations. Sales dipped by $16 million to $6.66 billion as a result of foreign exchange movements.

The full-year figures were in line with analysts’ expectations.

“2019 was a year of significant progress for the group,” said Mr Coulson. “The sustainability-driven demand backdrop for our infinitely recyclable products remains favourable and we look to further progress in 2020.”

Ardagh said metal packaging demand was strong, notably in the Americas, and global beverage can shipments increased by 5 per cent. Glass Packaging Europe delivered "another excellent year of growth, while Glass Packaging North America successfully stabilised earnings", the company said.

Restructure

Mr Coulson had been forced to restructure the North American glass business in recent years, involving plant closures and layoffs, to deal with a weakening mass beer market. The glass market in this region remains oversupplied, he said on a call with analysts.

Meanwhile, Ardagh plans to spend $250 million building capacity in its beverage cans business and European glass operations, focusing on extending existing plants, as demand continues to grow for these products amid consumers becoming more conscious about sustainability of packaging. Normal capital expenditure is pencilled to come to $350 million.

Ardagh’s initial public offering (IPO) in March 2017 involved the sale of an 8 per cent stake in the business to stock market investors. The remaining 92 per cent is held by a holding company whose shareholders include Mr Coulson, company managers and high-net-worth individuals.

The holding company has been looking for some time at placing more of its Ardagh Group shares in the market to pay down debt held at this level of the organisation, as well as giving long-standing investors in the business stock that they can trade.

However, Mr Coulson said on Thursday that share placements would not be carried out as Ardagh’s stock continues to trade at current levels, less than 8 per cent above its IPO price.