Johannesburg - Packaging group Astrapak has seen its three-year-old turnaround strategy yield results as it pared losses and increased profit.
The group yesterday reported a R20.6 million profit for the year to February – a big improvement from the R127m loss reported in the last period.
Read: Astrapak narrows loss
Chief executive Robin Moore said while the results were pleasing, he wanted the company to focus on its exit of non-core businesses and surplus assets such as the polyethylene terephthalate (PET) business it left last year and reposition the group as a manufacturer of moulding and forming technologies-based packaging.
The group said sales from the discontinued operations recorded a profit after interest and tax of R14.5m, including a headline loss of R5.1m.
Moore said Astrapak now had a streamlined business and fewer but larger customers with major investments in place to drive performance towards targeted returns.
The group attributable loss dropped to R3.9m from R143.3m a year before, equating to a loss per share of 2.7c, compared with a 114.4c loss previously. The headline loss per share was 14.1c compared with 71.5c for last year.
Net cash flow from continuing sales of non-core assets during the year under review, including East Rand Plastics, Cinqpet and Knilam, which all realised good value on exit, was R176.6m.
“We are satisfied with the results and we have made good progress since we undertook this restructuring and implemented a turnaround strategy,” Moore said.
The group manufactures and distributes an extensive range of rigid and flexible plastic packaging products.
Competitor Nampak also restructured it business, including offloading its corrugated and tissue division for R1.6 billion last year. Nampak also plans to sell off its flexible and recycling units.
Astrapak shares increased 9.04 percent on the JSE yesterday to close at R4.10.
The group’s revenue for the year decreased by 2.9 percent to R1.35bn, down from R1.39bn in the previous period. The drop in revenue was the reason for its decision to exit the PET plastic bottle market.
“We realised that the market has changed and big multinationals were coming in to South Africa to compete in the same industry we are operating in,” Moore said.
“While we have a leading market position, competitive conditions have intensified with the entry of international companies to the local packaging market and some aggressive pricing is evident from both local and international packagers.”
“I cannot speak for the competitor, but our motivation was based on how to make our business competitive going forward and this process was necessary to achieve that,” Moore said.
Net cash flow
Cash generated from operations was R113.3m, up from R37.1m reported in the previous period, and net cash flow from operating activities, after interest, tax and preference dividends was R55.7m.
The group did not declare a dividend as operational cash flows were reinvested into executing the turnaround strategy and to reduce debt.
“If turnover is excluded from a now discontinued PET business, which was included in the comparative, then turnover would have been 4.8 percent higher than the prior year,” Moore said.