US plant to boost Pacifica's sales rise
January 17, 2008
The Age's Ian Porter covered our attempt in 2000 to embarrass Jerry Ellis at the Pacifica AGM over his dreadful performance as chairman of BHP in the mid-1990s.
Sales growth will again outstrip earnings at Pacifica Group this year as the rapidly expanding manufacturer strives to extract better efficiencies from its new automotive parts plants in the United States.
Shareholders at yesterday's annual meeting were told that managing director Barry Jackson, who has presided over massive growth in the past five years, may leave the company within two years.
In addition, the meeting confirmed the appointment of former BHP chairman Jerry Ellis as a director. Only a handful of votes were recorded against Mr Ellis, even after a proxy-holder, Stephen Mayne, told the meeting that Mr Ellis, when chief of BHP's minerals division, had presided over the Magma Copper and hot briquetted iron investment decisions, which have so far cost BHP more than $4 billion in abnormal losses.
Pacifica chairman Russell Fynmore said trading this year had seen sales continue to rise strongly, although he warned that profit was not keeping pace.
He said sales would be up "significantly" from last year's $437 million in the first half-year but that interim profit would be in line with the previous interim result of $15 million before abnormals. Improving efficiencies would lift the full-year profit above the 1999 record of $32.9 million, he said.
Part of the problem is the 51 per cent-owned Knoxville, Tennessee, brake parts plant, which had to be expanded even before it was commissioned last year because of the booming vehicle market in the US.
Mr Jackson told the meeting that demand from General Motors and Ford was up to 20 per cent greater than expected and that "efficiencies did not reach our standards, especially in the second half of the year". He said this was still affecting earnings, but added that the Knoxville plant was already "a big cash cow".
The plastics division was trading slightly ahead of its 1999 performance but Mr Jackson said the construction products was still lagging due to weak infrastructure spending at home and in Asia.
Mr Fynmore told shareholders that Mr Jackson, 55, has been urging the board to develop a succession plan even though he had recently signed a new five-year contract.
"He thinks seven years is an appropriate sort of time and we think eight or nine," Mr Fynmore told the meeting. Under the new contract, Mr Jackson would have to give Pacifica six months' notice, but Mr Fynmore said he was confident Mr Jackson would not leave the company "in the lurch". "If a big acquisition or opportunity came along, he would stick around. But if there was nothing like that, in a year or so we will have to start looking for a successor."
He also told shareholders he was disappointed that the sharemarket did not value Pacifica shares higher - they dropped eight cents yesterday to $4.43 - "given our record performance last year".
He said he believed it was because investors saw Pacifica as an "old economy" company even though its success is based on its patented intellectual property. "Our technology is world class and this has been recognised by the world's largest automotive manufacturers, including our two major customers at Knoxville, General Motors and Ford."
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