Packaging giant Ardagh slides into loss amid sales dip and refinancing costs
Sales dropped 6% in second quarter at glass and metal container group
Ardagh said its glass business was particularly affected by coronavirus disruption
Ardagh Group, the glass and metal containers group led by Dublin financier Paul Coulson, swung into a loss in the three months to the end of June as its sales fell amid the Covid-19 pandemic and it booked one-off expenses relating to a refinancing of some of it debt.
The New York-listed company reported a net loss of $64 million (€55.3 million ) for the period, compared to a $69 million profit for the same three months last year.
Sales dipped by 6 per cent during the second quarter to $1.61 billion.
The company also paid a premium of $61 million during the period to buy back some of its bonds ahead of schedule as it continued a long-standing strategy of taking advantage of favourable markets to refinance debt at lower interest rates when opportunities arise.
Interest costs came to $71 million for the three-month period, down from $112 million for the corresponding period in 2019.
Ardagh, which makes drink containers for brands ranging from Budweiser beer to Coca-Cola, said its glass business in particular was affected by the economic disruption caused by coronavirus.
This side of the business “experienced reductions in customer demand and therefore revenue as a direct consequence of the various global lockdowns and the related impact to ‘on-premises’ sales,” it said, adding that margins were also squeezed as it grappled with excess capacity.
Still, earnings grew in its beverage cans business, it said.
“In addition, throughout the group incremental Covid-19-related costs, including increased safety and cleaning costs, were incurred,” it said.
The group said it does not expect any significant customers to default on payments as a result of the economic crisis. It had $1.45 billion of cash and cash equivalents on its balance sheet at the end of June, as well as access to $142 million of undrawn credit facilities.
Total borrowings stood at $7.29 billion at the end of the reporting period.
Adjusted earnings before interest, tax, depreciation and amortisation (Ebitda), a measure closely followed by analysts and Ardagh’s creditors, declined by 13 per cent to $271 million in the second quarter.
Ardagh’s chairman, chief executive and main shareholder Mr Coulson pulled the group’s previous financial guidance in April as companies globally grappled with the initial shock of the coronavirus crisis. Before then the company had been expected Ebitda for the full year to rise 2.3 per cent to $1.2 billion.
Mr Coulson said on Thursday that the company was now expected to post a “single-digit percentage” decline in earnings for the year.
Ardagh completed a deal last October to fold its metal food containers and speciality business into a joint venture called Trivium, controlled by Ontario Teachers’ Pension Plan Board. Ardagh retains a 42 per cent stake in Trivium.