Glass tariff prospect welcomed by Ardagh

SHARES in Paul Coulson’s metal and glass packaging company, Ardagh Group, tumbled by 9pc after its second-quarter results missed market expectations on the back of deteriorating conditions in the North American glass-production industry.

Mr Coulson, who took the reins as CEO last year, blamed the problems largely on cheap imports from China and Mexico and flagged wider plant closures to combat the sector-wide downturn.

He also said he welcomed a possible move by the US government to include glass packaging under tariffs planned for Chinese imports.

Cash at Ardagh sank by 6pc in the second quarter to the end of June as efforts to boost profitability in its US glass packaging proved more difficult than anticipated.

The fall in earnings before interest, taxation, depreciation and amortisation, a cash earnings measure, to $392m (€336m), was blamed on lower volumes, higher freight costs and the cost of planned production downtime.

However, revenue climbed by 6pc to $2.3bn, or 1pc on a constant currency basis, over the past quarter, while earnings per share leapt by 79pc to $0.25 compared to $0.14 in the same period last year.

In a statement to the New York Stock Exchange, Mr Coulson said the results “reflected good performances in three of our four divisions”.

He said this was “offset by a reduction in Glass Packaging North America, where multiple initiatives to improve profitability are expected to deliver benefits on a more gradual basis than previously expected”.

Ardagh, which counts Heineken, L’Oréal and John West among its customer base, will repay $440m of high-cost borrowings at the end of the month.

This will leave the group free of redemption obligations until September 2022.

The move to clear the bonds ahead of schedule offers the company some headroom as yields start to tick upwards after a decade of record-low interest rates.

Ardagh’s total borrowings stand at $8.3bn.

Mr Coulson said that as the company enters “the seasonally more cash generative second half, we remain focused on further deleveraging”.

Shares in Ardagh have fallen by close to 13pc since the group’s US partial initial public offering in March last year.

The group scaled back its earnings forecasts late in 2017 on the back of persistent weakness in the US beer market and adverse swings in the foreign exchange markets.

Ardagh said it is widening its investment spend over the short term, pumping an extra US$150m into multiple organic investment projects.