Pacific Dunlop re-rating a way off yet

The sale will result in an abnormal loss of $88 million after transaction costs and provisions for environmental remediation are are included in the annual accounts.

This is certainly a move in the right direction and should improve the balance sheet and free up capital to advance the company in other areas. Remember though that it was not so many years ago that this plant was being hailed as the state of the art solution to the company's lead recycling problems.

It's likely to be some time before the market once again feels comfortable with the company and its prospects and while there's no question that hard decisions are being made, plenty of work remains.

Sales growth falters

The lack of sales growth is a good example of this fact and must be a major concern for investors and management alike. During the six months to December, the entire group could only manage sales growth of 3.8% in buoyant domestic and US economic conditions.

If times get tougher, this performance could deteriorate further and like many other investors, we're wondering where future sales and earnings growth will come from.

On news of this divestment, PDP's share price recovered much of the ground it lost during the preceding months and is currently trading at just below the prices seen at the time of our last review of PDP on April 6.

While we continue to believe that there is better value elsewhere, current shareholders should HOLD and hope.