A slightly improved business environment, including a generally more settled labour situation, and the successful implementation of phase one of its turnaround strategy, have contributed to improved financial results for JSE-listed packaging company Astrapak for the six months ended August 31.

The company’s profits per share increased 138% year-on-year to 16.6c, with Astrapak recording an attributable profit of R20.1-million, compared with a loss of R52.3-million in the six months ended August 2014.

Astrapak CFO and MD Manley Diedloff pointed out, however, that the company expected the market to remain soft in the year ahead and, as such, it would continue with its disposal of noncore assets, valued at R304-million, which would further add value over the next six months.

For the reporting period, Astrapak received net cash inflow of R125-million from the sale of noncore assets, including East Rand Plastics, Cinqpet and Kinlam.

Diedloff noted that the company also expected improved cash flow by the end of the financial year and that Astrapak would be in a positive net cash position, with a current net working capital cycle of 30 days.

Astrapak’s earnings before interest, taxes, depreciation and amortisation margin also improved from 8.1% to 8.9% in continuing operations, but it also reported a headline loss a share of 6.5c for the six months under review, compared with a loss of 33.1c in the prior comparable period.

Further, Astrapak reported that its continuing turnover decreased by 6.2% year-on-year to R637.6-million as part of its strategy to exit either noncore or suboptimal markets in pursuit of higher-value business, but with selling prices per kilogramme improving further, up 4.5% for the period, the mix shifted in favour of higher-value business.

The average selling price was R45.67/kg during the period compared with R43.70/kg in the previous year.

Meanwhile, CEO Robin Moore highlighted that the global commodity recession was affecting regional economies to differing degrees, with economic difficulties in oil-dependent Angola, to which the group had an indirect export relationship through the manufacture of ultrahigh temperature yoghurt cups, resulting in significantly lower volumes to that market.

Moore noted that the company would continue to view other parts of Africa with caution, primarily focusing on its local capacity.

OPERATIONS
Moore highlighted that the company was now focusing on five major capital expenditure projects, including a multiyear supply agreement with a large multinational fast-moving consumer goods (FMCG) customer, with full volumes to flow once capacity was installed; power supply upgrades were completed; new equipment, civils and other building work on factory renovation was completed; and existing equipment was relocated to increase production on fewer sites and improve workflow and storage.

Additional multiyear contracts were also in place with another well-known local and international FMCG customer.

However, the company had experienced delays on a strategically important multiyear contract with a major international customer in the personal care market as a result of design changes and technically demanding specifications.

In preparation, Astrapak made factory capacity available in the Eastern Cape and at one of its KwaZulu-Natal operations and has absorbed costs, while the discontinuation of its Bronkhorstspruit plant was going to plan, with business reallocated in the group wherever possible.

The adjacent deodorant ball factory would be consolidated at the JJ Precision site before the end of the financial year.