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Latest shares news: Pro-Pac shares fall 18% amid dire Australian drought conditions

Australian packaging maker Pro-Pac Packaging Ltd falls 18.2% - the lowest fall in almost 10 years.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Pro-Pac Packaging shares fall lowest in 10 years
Source: Pro-Pac

The fall comes after the company announced the business is suffering due to on-going drought conditions in Australia.

The drop is the biggest intraday fall the flexible packaging company has seen since 2010, with shares falling as low as A$0.180 on Monday.

The company says the dire drought conditions coupled with high raw material input costs has affected the 2019 outlook.

Pro-Pac specialises in providing solutions for general industrial and primary packaging, safety and PPE, food services and food processing sectors with a national footprint.

Pro-Pac Chief Executive Officer, Grant Harrod said sales are tracking below expectations as growers are planting less.

“In addition, we have experienced on-going upward pressure from raw material cost increases, adverse FX and energy costs, and although we have made some progress in passing on these cost increases to customers, we do not expect margins to fully recover in the short-term, particularly in our Industrial and Flexible packaging businesses.” Mr Harrod said.

Pro-Pac's 2019 outlook

The Company revised its FY19 EBITDA to $30-33 million with the on-going financial impact of the drought in mind.

“With continued pressure on sales volumes and margins, we continue to strongly focus on growth and integration synergies which we believe will set up the business for success in the longer term.” Mr Harrod said.

Stocks have fallen more than 50% over the year, with the company’s year oreturn dropping 60.87% upon last close. Analysts predict the fall will continue ahead of Pro-Pac’s AGM on Tuesday.

The Company has said in a statement that it will also be undertaking an assessment of “the carrying value of intangible assets” as part of its half-year accounts preparation.

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