Nompumelelo Magwaza
ASTRAPAK’S headline earnings a share for the six months to August would reflect a loss of between 33c and 33.3c, hurt by the strike in July, the paper and plastic maker said in a trading update on Friday.
The financial cost of the strike was about R30 million, which, the company said, represented an irrecoverable loss.
Astrapak posted a restated headline loss a share of 1.5c for the previous six months.
Earnings a share were expected to show a loss of between 42c and 44c compared with the restated loss a share of 23.4c in the previous period.
Packaging companies were among the businesses affected when members of the National Union of Metalworkers of SA (Numsa) downed tools over pay.
The strike in July had “a damaging impact on the group and the related labour unrest, which was not limited to Astrapak or the industry, was among the worst that the group has experienced, with all Astrapak’s converting operations being affected and the majority unable to function for almost the entire month”, it said.
The Astrapak management team implemented contingency plans and successfully engaged with all relevant parties, although in certain instances there was no alternative but to declare force majeure with a limited number of directly affected customers.
“Profitability was adversely impacted due to lost sales, productive down time, significant under-recovery of costs and increased costs associated with security and distribution,” the group said.
Downsizing was begun immediately after the strike to protect the commercial viability of certain operations.
Astrapak had also undergone a strategic turnaround during the six-month period in which four of the 13 businesses in the rigids division were under review in line with changing fundamentals and to ensure the group had scale in its core markets. The costs related to the strategic reviews were estimated to be R26m in the period.
The review included the disposal of Hilfort Plastics in Cape Town, which was accompanied by retrenchment costs.
Astrapak advised its shareholders of the costs associated with consultations around the closure of Cinqplast Denver as well as streamlining operations in the Eastern Cape so as to eliminate loss-making product lines and enable it to take on an important contract from a leading international customer.
“The overall economic climate has not been supportive of consumer spending or capital investment and as a result market demand of late has softened and a number of customers have delayed the commissioning of growth projects and the rebuilding of inventory levels.”
Astrapak said its financial position remained sound. Net interest-bearing debt had been reduced and the debt-to-equity ratio was below 30 percent.
Astrapak’s half-year results are due to be released on September 29. The group’s shares lost 3.85 percent to R6.49 on Friday.