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TransPacific’s NZ earnings miss guidance after writedown

TransPacific’s NZ earnings miss guidance, assets written down A$181.5 mln

By Paul McBeth

Aug. 24 (BusinessDesk) – Australian waste manager TransPacific Industries Group missed its own guidance for its New Zealand business and wrote down the value of those assets by A$181.5 million.

The New Zealand business reported earnings before interest, taxation, depreciation, and amortisation of A$82.5 million in the 12 months ended June 30, down from A$85.2 million a year earlier. That undershot the A$83 million to A$85 million range flagged last month. Local revenue rose to A$350.3 million compared to A$341.6 million in 2010.

The Queensland-based group reported a net loss of A$296.5 million compared to a profit of A$59 million in 2010 after writing down the value of its assets. The bulk of that write-down came in New Zealand and leaves TransPacific’s NZ goodwill valued at A$577.5 million.

It also took a A$1.5 million impairment charge on lost New Zealand contracts, and along with Australian impairments, recognised a A$291.5 million charge.

Last month, TransPacific said it had to change its long-term growth forecasts, essentially admitting its $870 million purchase of Waste Management New Zealand in 2006 was too high.

Still, the group is upbeat about its prospects in New Zealand, saying the Christchurch earthquake lifting waste volumes across the entire supply chain.

Debt has been an issue for TransPacific and it is focused on repaying lenders who helped finance its A$1.25 billion of Australian rival Cleanaway just before the global financial crisis in 2008.

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The company is confident of meeting looming maturities, and has repaid A$240 million of net debt since tapping shareholders for A$801 million in the middle of 2009.

As at June last year, TransPacific's local business had $662.2 million in total borrowings, some $584.5m of which was with related parties.

About $58.1m of that debt was in mandatory convertible notes, a favoured instrument in trans-Tasman companies to reduce tax bills which are currently under scrutiny by New Zealand's tax department.

TransPacific acknowledged a contingent liability in today’s result that tax authorities on both sides of the Tasman are reviewing its position in both countries, but it is still too early to quantify.

The board decided not to pay a dividend as it the waste manager focuses on repaying debt.

The shares are listed but not traded on the NZX. Ahead of the ASX open, the shares were at 71.5 Australian cents having tumbled 49% this year.


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