Ardagh Group, the metal and glass containers group led by Irish financier Paul Coulson, has downgraded its full-year financial forecast for a second time in three months after a weak European food harvest hit its metal packaging unit on this side of the Atlantic in the third quarter.
The group, which floated on the New York Stock Exchange in March last year, said on Thursday it now expects its earnings before interest, tax, depreciation and amortisation (ebitda) to come between $1.45 billion (€1.27 billion) and $1.475 billion this year.
In July, Mr Coulson had projected full-year ebitda of $1.5 billion, which was $50 million below his previous forecast and mainly reflected problems in its North American glass division and currency fluctuations.
The group chairman and chief executive said the third quarter was “marked by high levels of cost inflation, third-quarter earnings reflected strong growth in Metal Packaging Americas, with all parts of that business performing very well”.
Footprint adjustments
“In Europe, we recorded good growth in glass packaging during the quarter, while our metal packaging business was adversely impacted by a weak food harvest. In Glass Packaging North America, our footprint adjustments and other initiatives to rebuild profitability continued against a challenging market backdrop,” he added.
Mr Coulson, who holds an effective 33 per cent stake in the listed business, said that the group remains “focused on cash generation and de-leveraging over the final quarter and into 2019”.
Ebitda fell by 9 per cent to $400 million in the third quarter compared to the same period last year.
The European metal packaging unit’s ebitda fell to $151 million from $181 million, while earnings at the North American glass division declined to $67 million from $80 million. Earnings in the North American metals operation rose during the period, while they were broadly flat in the European glass operations flat.
Debt downgrade
Earlier this week, one of the world’s leading credit ratings agencies, Standard & Poor’s, cut its outlook on Ardagh’s debt ratings, citing the group’s “aggressive” financial policy, demonstrated earlier this year as the glass and metal containers maker borrowed $350 million (€307 million) to fund a shareholder windfall.
Lowering its stance on Ardagh’s “B+” credit rating to “stable” from “positive”, S&P said it expects the group’s debt to “remain at or above” seven times ebitda to remain in the near term.
The credit rating is four levels below what S&P deems to be investment grade.
The $350 million of so-called payment-in-kind notes were issued in January by Ardagh’s ultimate parent group, with interest on the bonds set to be rolled up and added to the principal of the debt over the five-year lifetime of the securities, rather than investors receiving regular cash payments.
Ardagh, built up over the past two decades through a series of acquisitions by chairman and chief executive Paul Coulson, is the third-largest global manufacturer of metal beverage cans, with leading positions in glass food and beverage packaging and metal food packaging.
