IPL’s earnings slide 37% as plastics firm looks for better offers

Dublin-headquartered IPL Plastics reported on Wednesday that its earnings slumped 37 per cent in the second quarter as the maker of everything from yoghurt pots to refuse bins continues to search for better takeover offers even after agreeing to be bought by US private equity Madison Dearborn.

The company's net profit fell to $5.3 million (€4.5m) from $8.5 million for the second quarter of last year, with revenue declining 9.1 per cent as they were hit by the Covid-19 crisis. The company reports figures in US dollars but is listed on the Toronto stock market.

“Our performance improved through the quarter as the diversity of our product range and markets assisted recovery and delivered financial results ahead of market expectations,” said chief executive Alan Walsh. “This was achieved in challenging market conditions due to widespread Covid-19 disruption, which continues to impact operations and limits visibility regarding performance for the remainder of 2020.”

The company, once known as One51, announced on July 29th that Madison Dearborn would pay 10 Canadian dollars (€6.40) per share, which values its equity at $555 million Canadian dollars. IPL Plastic’s initial public offering in June 2018 was set at $13.50 Canadian dollars.

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As part of the deal IPL Plastics has been allowed to search the market for a better offer – under what is known as a “go-shop” provision – until at least the end of August. The provision allows for the company to solicit rival bids for at least 30 days, though it could be stretched out to 40 days. Still, analysts say there is a slim possibility that a better offer will emerge.

Shareholder approval

The agreed transaction still needs 66 per cent shareholder approval, and would see legacy shareholder including Irish farmers, dairy co-operatives and high-net-worth individuals sell out, while Caisse de Dépôt et Placement du Québec plans to roll over 24.9 percentage points of its almost 27 per cent stake into the Madison Dearborn deal. It has decided to accept cash on the same terms as other shareholders for its remaining stock.

IPL has traded at a discount to larger publicly-quoted peers since its IPO for a number of reasons, according to the company, including the business’s financial performance in the past two years. The share price underperformance has also made it more difficult to do stock-based deals and push consolidation in the fragmented plastics market.

The 9.1 per cent drop in second-quarter revenues to $153.3 million was mainly driven by a drop in sales volumes in the large format packaging and environmental solutions (LF&E) division in North America, the pass-through of resin price reductions to customers, a slow down in sales of automotive bins, along with price reductions in agricultural bins in the returnable packaging solutions division. Currency fluctuations also hit the company.

These decreases were partially offset by increased sales volumes of environmental containers in the LF&E division in Europe, and volume growth in its consumer divisions in North America and Europe amid a rise in demand for food packaging across retailers.