Waste manager Transpacific Industries Group says it is facing a sharp fall in net profit for the 12 months to June 30.
The company said the figure would be down 57% at just $61 million, thanks to a sharp second half fall in trading profit and the costs of the lengthy recapitalisation process.
In a statement to the ASX yesterday Transpacific Industries said yesterday it expects operating earnings before interest, tax, depreciation and amortisation (EBITDA) in fiscal 2009 to be around $447 million.
It said reported EBITDA was expected to be around $455.7 million, including an $8.7 million profit from the repurchase of convertible notes in the first half.
Transpacific said it also expected to report a 25% fall in operating EBITDA in the second half of 2009 from the first half’s level of $255.7 million.
In a statement to the Australian stock exchange yesterday, Transpacific said normalised net profit would be 57 per cent lower at $61 million.
The company said net profit in the second half would be affected by significant items and other one-off charges of around $210.3 million before tax, including impairments of goodwill, contracts and other assets.
"Transpacific is continuing to test the carrying value of goodwill, doubtful debts, contracts and listed securities," the company said and, as a result, actual results may still vary materially from the forecasts.
The company said it had won new work totalling over $100 million over the last few months, about $60 million of which would fall into fiscal 2010.
Transpacific said it expected earnings from solid waste to fall 18% between the first and second halves of fiscal 2009.
It said profit was affected by "the significant slowdown in economic activity in New Zealand", reduced waste contributions from the construction sector and a decline in prices for recycled paper, plastic and metals hurt earnings.
Earnings at the liquids waste, energy, manufacturing and commercial vehicles divisions were also expected to fall, the company told the ASX.
Earnings from all Transpacific’s divisions would fall between the halves, except for Transpacific’s relatively small remediation and organics sector, where they would rise by 67% to $1 million.
Transpacific also said, however, that a key lender had agreed to waive covenant breaches, which helped clear the way for a recapitalisation through a $496 million investment in the company by Warburg Pincus as a new cornerstone investor.
That was announced in June when Transpacific unveiled plans for a long-awaited recapitalisation, including raising $800 million to pay down its debt.
Transpacific shares have been suspended since last February, when it triggered a series of debt covenant breaches with mark-to-market losses of $69.3 million on interest rate hedges, which in turn triggered cross-default provisions on its huge, $2.13 billion corporate debt facilities. They last traded at $1.80.
But that fund raising could be under pressure following the re-wording of the 2007-08 profit because of what were called "irregular items.
Transpacific restated its 2007-08 accounts because they included $48 million of "irregular items". These boosted its pretax earnings by 10 per cent to $540.5 million.
The "irregular items" included a $22 million profit on land sales and a $17 million provision for the cost of work on rubbish tips.
Warburg Pincus could end up with close to 40% of Transpacific is shareholders don’t support the capital raising: the latest news on earnings isn’t encouraging..
