Pact Group to sell contract manufacturing division

Photo: Pact Group

Pact will put  its contract manufacturing division up for sale in order to be able to pay down rising debts, the Australian packaging group announced this week.

“Contract Manufacturing is an attractive business that enjoys leading positions in sectors with strong growth potential,” said managing director and CEO, Sanjay Dayal.

“However, Pact’s success over the longer term is dependent on our ability to deliver organic growth and restore margins in the core packaging business while growing our materials handling and sustainability businesses.”

Pact has appointed Citigroup to facilitate the sale of the division, which reported sales of more than $370 million in 2019.

The market responded favourably to the announcement, with Pact shares increasing 7 per cent yesterday.

Dayal said that the sale will “restore margins in the core packaging business.”

“Divesting Contract Manufacturing will simplify the portfolio and sharpen our focus on driving improved returns in the remaining group. Importantly, divestment will strengthen our balance sheet and improve our financial flexibility,’’ he told the market in a statement.

Jalco, Pascoe’s and Australian Pharmaceutical Manufacturers form part of the division, and provide packaging for groceries, cosmetics, and household goods for brands and supermarkets.

The businesses include manufacturing capability for powders, liquids, aerosols and therapeutic nutraceutical product, broad product portfolio including laundry detergents and softeners, home cleaning products, insecticides, skincare products, hair care products, vitamins, and supplements.