Transpacific Industries warns of deep lossROSS KELLY From: Dow...

Transpacific Industries warns of deep loss
ROSS KELLY From: Dow Jones Newswires June 29, 2011 12:30PM

TRANSPACIFIC Industries, Australia's largest waste management company, forecast a steep annual loss today after writing down the value of its manufacturing and New Zealand divisions.

Marking a substantial downgrade to guidance provided three weeks ago for a net profit of at least $41 million, it forecast a net loss for the year to June 30 of between $177m and $209m. That compares with a net profit of $59m a year earlier.

The downgrade is another blow for a company that has been struggling under a heavy debt burden since it acquired waste management group Cleanaway immediately before the global financial crisis hit.

It comes after an impairment review conducted by the company, which turned up a non-cash writedown on asset carrying values of between $225m and $250m.

Transpacific's manufacturing division makes parts for waste disposal vehicles, washers, bins and waste compaction units. Transpacific said it was embarking on a major turnaround of the division, including a review of every cost and product line.

"Accordingly, all goodwill relating to past acquisitions of manufacturing businesses will be written off," it said.

In New Zealand, the impairment related to applying "a more conservative future growth rate" given difficulties facing the economy both generally and following earthquakes in Christchurch.

The Brisbane-based group said it was in compliance with its banking covenants, with debt reduction still its top priority.

To address coming debt maturities, it said it intended to apply operating cash inflows, the divestment of up to five property assets that could generate up to $20m-$30m, and utilisation of up to $200m headroom under its senior debt facility.

Goldman Sachs said earlier this month that Transpacific might have to issue new shares or offload assets such as its New Zealand operation or heavy vehicles unit to meet looming debt maturities.

A Transpacific spokeswoman told Dow Jones Newswires at the time the company had "multiple avenues" to meet coming maturities including cash, debt, equity and asset sales.

Transpacific capped off 2008-09 with a deeply discounted $801m equity raising, largely taken up by cornerstone investor Warburg Pincus, to pay down debt after reporting a steep annual loss.

It has reaffirmed its annual operating earnings before interest, tax, depreciation and amortisation guidance of $420m-$430m, broadly flat from the previous year's $424.4m.

That helped put a floor under its share price. By early afternoon, its shares were up half a cent at 76 cents in line with a 0.8 per cent rise in the broader market.

The shares were trading above $11 in July 2007.