Transpacific takes big hit on NZ operations

Following a review, the Queensland company will cut the carrying value of its New Zealand businesses by as much as $200 million and its under-performing manufacturing division by up to $45 million.

Three weeks ago, after a "please explain" notice from the stock exchange, Transpacific said it expected to post a net profit of up to $48 million for the year, after booking a $1.8 million restructuring charge and a $5.5 million asset write-down. It was still in the process of reviewing the value of non-current assets at the time.

The latest write-downs mean it is now forecasting a net loss of between $177 million and $209 million this financial year, compared with a $59 million profit last year. However, it has left unchanged earlier guidance of between $420 million and $430 million in pre-tax earnings this financial year.

The write-downs did not come as a big surprise to investors. Shares in Transpacific rose 3? to 78.5?.

Transpacific, the country's largest waste-management company, said it had slashed the value of its New Zealand operations because of the need for a "more conservative future growth rate", citing a weak economy across the Tasman.

It has also written off all of the goodwill from acquisitions over the years. Its poorly performing manufacturing division, which makes plastic bins and rubbish compaction units, will report a loss of about $2 million this year.

But Transpacific again highlighted that its priority remains reducing a debt burden of about $1.5 billion, a hangover from an acquisition binge in the years leading up to the global financial crisis.

"The top priority is digesting the debt issues that they have accumulated ... and getting the most they can out of their earnings and hopefully rolling the debts over as they fall due and replacing them with cheaper facilities," White Funds Management's investment analyst Will Seddon said.

Transpacific was bailed out by the private equity firm Warburg Pincus in 2009 after it agreed to back a $801 million capital raising. Warburg Pincus subsequently became the largest shareholder, with a 34 per cent stake.