Pro-Pac Packaging: A look into small-cap materials company - Pro-Pac Packaging

SummaryPPG delivered an improvement in earnings in FY20 over the previous year. In November 2020, the company said the momentum has continued in the new financial year. Pro-Pac Packaging Limited (ASX:PPG) provides packaging solutions to a range of industries, including agriculture, fast-moving consumer goods, retail, food processing, primary produce. AGM Summary - November 2020In FY20, PPG managed to grow its earnings despite a spate of disruptions ranging from bushfires to the pandemic. The company's executive management team also strengthened the balance sheet and initiated operational efficiency programs. During the year, PPG lowered its net debt, refinanced senior debt facilities besides delivering working capital improvements. The company also resumed dividend payments, reduced balance sheet gearings, and grew its earnings. Source: PPG Presentation, 26 November 2020In 2021, the packaging company is targeting to close the new ERP implementation project and Chester Hill Factory. These initiatives would establish an efficient platform for future growth while also bringing a significant change in cost base in the future. The firm is also seeking growth through earnings-accretive acquisitions. But the primary strategy is to deliver shareholder value through operational efficiencies, working capital improvements, and organic growth. Since PPG's business was not interrupted due to the pandemic, the company was not eligible for JobKeeper payments. In FY20, its EBITDA margin improved to 6.8%, driven by a focus towards high margin flexibles division, operational efficiencies, centralised procurement, and favourable resin price outcomes. As a result, EBITDA (pre-AASB 16) was $32.4 million for the period, up by 15.4% over the previous year. An improved profitability and a $16.1 million reduction in the working capital contributed to a decline in net debt. At the end of FY20, its net debt position was $46.1 million compared to $82.9 million in the previous year. After nearly two years, the company resumed dividend payments with a fully franked dividend of 0.4 cents per share in October 2020. Source: PPG Presentation, 26 November 2020Chief Executive Tim Welsh said that FY20 momentum has continued into FY21. Before significant items, PPG estimates profit before tax in H1 FY21 would be better than last year ($8.8 million in 1H FY20). PPG shares last changed hands at $0.19 on 27 January 2021.