Geon’s sales up 6% after $250m debt restructure eases pain

According to the results for the full year 2010/11 – which were lodged with ASIC last September but only recently seen by ProPrint – Geon’s revenue was $265.6 million, up $69.6 million from $195.9 million the previous year.

However, year-on-year comparisons can be misleading, because the company underwent a corporate restructure across the Tasman near the end of the 2009/10 year. Prior to this, Australian and New Zealand results were reported separately.

The New Zealand results were only included for part of the 2009/10 financial report, while they were included in full within the 2010/11 results.

There were three factors driving improvements in Geon’s results: the inclusion of the New Zealand business, a lift in operating revenues, and the $250 million forgiveness of debt.

Geon chief executive Graham Morgan told ProPrint: “While the business performance improved in FY11 and there’s also an uplift relative to FY10 because of the partial inclusion of NZ in FY10, the main lift in profit results from the accounting treatment of the debt restructure.”

This debt restructure, in which the group’s lender forgave $250 million in return for future equity, saw Geon’s total liabilities improve from $215.9 million to $15.4 million.

But Morgan said that trading had also improved, with revenue up 6% year-on-year in 2010/11. He also pointed out that these 2010/11 results were already out-of-date.

“These figures do not reflect the 10 months since these financials were presented and, despite the challenging economic environment, Geon’s current trading is better than last year due to a range of improvement initiatives, investments in new technology and restructuring throughout the group.”

Geon has been undertaking a major cost-cutting drive across its eastern seaboard operations, including the shutdown of the Brunswick plant in Melbourne and the closure of its Dee Why facility in Sydney.

“The maximisation of our eastern seaboard operations and functions is ongoing and is expected to continue for some time, with the majority of building closures having now occurred,” said Morgan.

“With that in mind, Geon will not comment on expected financial results from this although we are already experiencing the expected uplift in operational efficiencies and lower cost-to-serve for our business.”

He added that job cuts had been kept to a minimum and said Geon had 1,100 staff across Australia and New Zealand.

“Over the past 10 months, Geon has worked very hard within our business on its transformation plan, which has included the consolidation of our footprint, with a number of site closures reducing cost, improving operational efficiencies, and press maximisation.

“I was pleased to see that, of the staff affected by us consolidating sites, the majority were redeployed throughout the business into our other locations,” said Morgan.

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