Debt-laden Transpacific warns on profit

Transpacific also indicated that it is likely to write down the carrying value of its assets.

The warning did not surprise investors after the near-collapse of Transpacific last year but they remain concerned about its debt burden. Shares in Transpacific fell 1.5? to $1.37.

Yesterday the company warned that market conditions in liquid waste, manufacturing, construction and demolition, and commercial vehicles had been weak in the six months to December 31.

It said pre-tax operating earnings would fall to between $197 million and $200 million in the first half, down from $256 million in the same period last financial year. Macquarie Equities has previously forecast that Transpacific will post pre-tax earnings of $201 million for the period.

The latest guidance comes just a week after the shock resignation of Transpacific's chief financial officer, Glen Battershill, just 18 months after he began work. He will leave in March.

The company was bailed out by private equity firm Warburg Pincus in June after it agreed to back a $801 million capital raising. Warburg Pincus became the largest shareholder, with a 31 per cent stake, following the recapitalisation, while the holdings of Transpacific's executive chairman, Terry Peabody, shrank from 38 per cent to 18.5 per cent.

Despite the injection of funds, Transpacific is still carrying about $1.7 billion in debt about $1 billion of which is due to be repaid by December.

Transpacific also said it expected an interest expense of $86 million in the half.

Analysts said the higher than expected charge was likely to reflect the timing of cash proceeds from the capital raising and lower than anticipated debt repayments in the first half.

White Funds Management managing director Angus Gluskie said investors remained uncomfortable about Transpacific's debt and high-risk profile.

"They certainly haven't fixed the problems. Obviously there is a question mark as to the fact that they are looking at their carrying values and potentially they may be forced to book a write-down," he said.

"There has obviously been a big cloud over their reporting over the last couple of years and I don't think people were expecting a dramatic turnaround in the profit results."

Macquarie Equities analysts also said yesterday that Transpacific would need an improved performance in earnings in the second half for investors to be confident that a full turnaround was under way.