A somewhat confusing, but busy morning yesterday for waste handling group, Transpacific Industries (TPI) and its management, board and investors.
We had a poor trading update, which was explained by comments from the CEO, Kevin Campbell, and minutes later, a separate announcement revealing Mr Campbell’s departure.
No wonder the shares bounced around a bit, losing almost 12% of their value or more than 10 cents, on the day, to end at 78.5c.
CEO Campbell told the company’s board he believed he’s not willing to stay on board.
"Mr Campbell believes that he is unable to provide the longer term commitment required to drive the continuing transformation of the business but will continue to work with the Board and Senior Management to ensure a smooth transition to a new CEO," the company said in yesterday’s second statement.
The announcement was made as the company said it expects to make a net profit of between $46 and $53 million in the year to June 30, including one-off costs of $14 million.
But underlying earnings in the year to June 30 are expected to be between $405 million and $415 million, lower than the previous year’s $440 million.
TPI YTD – Shares Sold Off And CEO Goes After Downgrade
The company, which owns the Cleanaway waste handing business, said weak economic conditions across Australia in manufacturing, industrial and construction markets continued to impact on its performance.
"Market conditions were tough in the first half and those conditions have generally deteriorated further," Mr Campbell said.
Having already cut costs and sold underperforming businesses, the company flagged the sale or closure of a number of other underperforming operations to achieve extra cost savings.
And the statement from the company indicated that the question of asset impairment would be considered once the results of the operational review, now underway, were complete.
And in yesterday’s first statement from the company, Mr Campbell gave nothing away about why he had decided to go so suddenly.
He said “While our expectations for FY13 EBITDA are lower than those achieved in FY12, we have made progress on debt reduction, cost savings and divestments. We will be increasing the scope of these initiatives over the coming months with the business and operational review being undertaken in conjunction with L.E.K. Consulting.” That seemed to indicate he would be hanging around.
It wasn’t until that second statement. Short and to the point, it also provided no clues as to why Mr Campbell had decided to quit yesterday, at the time of the downgrade. The company said executive recruiters Spencer Stuart had been hired to search for a successor to Mr Campbell.
Looking at its divisional performance, the company said:
"The Cleanaway division continues to be impacted by weak landfill volumes reflecting soft economic conditions in Victoria, South Australia and Western Australia. Collection volumes remain stable with modest revenue growth being achieved in Commercial & Industrial and Municipal markets.
"The Industrials division has continued to experience deferral of a number of large maintenance and shutdown projects across the industrial and mining sectors as customers look to maximise cost reductions this financial year. The downturn in the manufacturing sector has also reduced volumes in the higher margin liquid processing waste streams.
"Trading conditions in New Zealand have shown an improvement during the second half as both the Auckland and Christchurch markets are showing increases in general activity levels.
"The Commercial Vehicles business is expected to report good profit growth in FY13. The heavy duty vehicle market has remained stable although the second half result will be lower than that recorded in the first half, which included the benefit of dealer re-stocking."
‘Debt reduction remains a key priority. Transpacific is forecasting the repayment of approximately $100 million of gross debt in FY13. This is expected to result in more than $28 million of cash interest savings, with total underlying net finance costs for FY13 of approximately $119 million, a reduction of $34 million compared to FY12," the directors added.
