Transpacific Industries (TPI) is a recycling, waste management and industrial services company operating in Australia and New Zealand.

Its clients range from small businesses to larger commercial and industrial companies. The group's core responsibilities include recycling solutions, waste management services, parts washing equipment and waste oil collections.

Key Points

FY13 results: Revenue grew 0.4% over the year, which in the current environment is a good result, The group did report a loss of $218.7 million, but there was $286.6 million of significant non-cash impairments, On an underlying basis the group recorded a net profit of $67.9 million, a rise of 17.1% from the prior year's result.

The underlying result was on the back of a $73.1 million reduction in net debt, which helped lead to underlying interest expense decrease by $35.9 million, Allowing the group to achieve this reduction in debt has been a strong operating cash flow, which rose 4.5% over the year to $282.4 million.

Asset Sale: The group announced the sale of its Commercial Vehicles business for $219 million, We think the asset sale was a good move for the following reason; A reasonable price for the business was achieved, The funds will be used to pay down the group's debt, which is expected to reduce its net interest expenses by $12 million and it allows the company's management to focus on its core waste management business.

Outlook

We like the steps the group is taking to refocus its business. An internal view of the business has identified 42 branches that are either non-core or underperforming and are to be sold or closed.

The eventual proceeds of these sales are likely to be used for further debt reduction, which we believe alive investors debt concerns and leading to further share price gains.

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