Funding Crunch Looms as Pro-Pac’s Cash Flow Turns Negative in March Quarter

Revenue Softening Amid Challenging Trading Conditions

Pro-Pac Packaging Limited (ASX: PPG) disclosed a revenue decline to $62.5 million for the quarter ended 31 March 2025, down $6.2 million from the corresponding period in 2024. The company attributed this to softening trading conditions across its flexible and specialty packaging segments in Australia and New Zealand.

The flexible packaging division accounted for 77.1% of quarterly revenue, while specialty packaging contributed 22.9%. Year-to-date revenue reached $204.4 million, reflecting ongoing pressures in the market.

Extension of Bennamon Finance Facility Provides Short-Term Relief

In a significant financing development, Pro-Pac extended its $13 million short-term finance facility with Bennamon Pty Ltd, a wholly owned subsidiary of Kin Group, from 31 March 2025 to 1 March 2026. The company has fully drawn this facility, which remains unsecured, and Bennamon also provided a $5 million guarantee to support ScotPac debtor financing arrangements.

This extension offers critical liquidity support as Pro-Pac navigates operational challenges and pursues its strategic review. The company reported $0.5 million in cash on hand and $2.9 million in unused financing facilities at quarter-end.

Cash Flow and Funding Position Highlight Operational Pressures

Operating cash flow for the quarter was negative $4.3 million, reflecting the impact of softer trading and working capital movements. This outflow was partially offset by reduced capital expenditure during the period.

Pro-Pac’s total financing facilities stood at $52.2 million, including debtor finance, asset finance, and overdraft arrangements. Notably, the debtor finance facility limit was temporarily increased post-quarter to $35 million, subject to ongoing review, enhancing the company’s liquidity buffer.

Strategic Review and Board Developments

The company continues its strategic review aimed at improving profitability and optimizing capital allocation. On 1 April 2025, Pro-Pac appointed a Chief Transformation Officer from a major shareholder to support this process, signaling a commitment to operational turnaround.

Board independence was reaffirmed despite substantial shareholdings by directors John Cerini and Mark Blackburn. The board concluded that neither director’s shareholding impairs their independent judgement.

Performance Rights and Governance Updates

During the quarter, 6.1 million performance rights granted to key management personnel lapsed due to unmet conditions, including nearly 6 million rights previously granted to former CEO John Cerini. This reflects ongoing adjustments in executive incentives aligned with company performance.

Payments to related parties totaled approximately $2.8 million, primarily for remuneration and services from Visy Industries Pty Ltd, conducted on arm’s length terms.

Outlook and Funding Considerations

Pro-Pac estimates it has approximately 0.79 quarters of funding available based on current cash flows and unused facilities, though this would extend to nearly two quarters with the additional $5 million debtor finance drawdown secured post-quarter.

The company is actively exploring longer-term funding options, including debt and equity solutions, to support its strategic objectives and stabilize its financial position.