Paul Coulson’s Ardagh Group has sharply reduced its annual profit prediction for its glass bottle division, which is facing more pressure as the packaging conglomerate continues to explore alternatives to reduce its debt of nearly $12.5 billion (€11.5bn). Ardagh Group, a global producer of glass and metal containers for the beverage sector, has been developed by Irish investor Paul Coulson over the previous quarter of a century. On Tuesday, the company announced a downward revision of the annual Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) estimate for its glass bottle division to $680 million, a significant drop from the previous forecast of $750 million-$780 million. The adjustment is attributed to below-expected consumer demand in Europe this year and a shift from glass to cheaper aluminium cans by beverage manufacturers. Group chairman Herman Troskie disclosed the reduced forecast during a call with debt investors on Thursday afternoon, post the company’s quarterly results announcement. Separately, Ardagh Metal Packaging, Ardagh’s can division listed on the New York Stock Exchange and 75% owned by the group, has enhanced its confidence in its annual prospect, now estimating that its EBITDA will range between $640 million and $660 million, with a $10 million increase at the lower limit. Given dwindling sales volumes last year, the bearish expectation for the glass division indicates that the group’s prediction for total earnings growth this year is now just 1.6-3.1 percent. Ardagh indicated during the call that it intends to minimise its glass production capabilities in Europe in the latter half of the year. This decision follows the recent closure of a glass bottle manufacturing plant in Texas and the indefinite suspension of production at another Washington-based facility in Seattle. According to its most recent report, Ardagh recorded a $131 million impairment charge for these operations in the second quarter.
Mr Trotskie took the reins from Mr Coulson as Chairman of Ardagh towards the end of the previous year. Trotskie reiterated Ardagh’s consideration of various strategies to alleviate their debt obligations. However, the ambiguity of the business’s progression makes setting a manageable capital structure an intricate task. Coulson, who remains a board member and retains a significant 36% stake in the company.
Net liabilities for Ardagh Group surged to $10.6 billion in June from $10.1 billion in December. With an earnings slump in the first half of the year, net debt increased to 8.1 times Ebitda over the preceding 12 months, up from 7.3.
It’s anticipated that ARD Holdings SA, the ultimate parent company at the apex of Ardagh’s corporate structure, and is based in Luxembourg, has borrowings close to $12.5 billion. At present, Ardagh’s riskiest debt, $1.7 billion of subordinated bonds, have been trading between 19 to 26 cents on the dollar, suggesting market sentiment that bondholders may not recoup their full investment.
Additionally, Ardagh and its joint-venture partner in the food cans business, named Trivium, of which Ardagh owns 42%, are believed to be considering selling the company as another means to reduce its debt. Mr Trotskie, however, did not provide any comment on this potential sale.