Astrapak will mechanise local factories after strike raises loss

Astrapak presented their interim results today.photo supplied

Astrapak presented their interim results today.photo supplied

Published Sep 30, 2014

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Nompumelelo Magwaza

THE AFTERMATH of the metalworkers’ strike in July would not result in paper and plastic maker Astrapak moving its manufacturing plants elsewhere on the continent but would force it to look at greater automation and mechanisation of some of its operations to reduce its dependence on labour, chief executive Robin Moore said yesterday.

The group said an irrecoverable strike-related cost of R30 million contributed to its loss for the six months to August of R52.3m and headline loss of R40.1m.

The total loss a share attributable to shareholders equated to 43.2c (from a loss of 23.4c a year ago), with the loss a share from continuing operations of 25.8c (from a loss of 1.2c a year ago).

“Labour unrest was among the worst the group has experienced. Converting operations were badly affected, with the majority unable to function for almost the entire month,” Moore said.

Astrapak had had to declare force majeure on deliveries to a limited number of directly affected customers. “Profitability was impacted by lost sales, downtime, cost under-recovery, and higher security and distribution costs,” he said.

However, the group’s strategy would remain focused on strengthening its operations in South Africa. “I do not think the strike has changed that strategy in any way. But what it has done is that we decided to take action post the strike to safeguard some of our businesses in terms of retrenchments and restructuring.”

Astrapak would do what was necessary to safeguard its future in South Africa. “The reality is that we supply companies that manufacture and pack in South Africa. It is our base.

“However, an inevitable consequence is that we will have to see more automation and mechanisation of our processes to reduce our dependency,” Moore added.

The group’s revenue improved by 3.5 percent to R1.15 billion.

Moore had expected some rise in demand after the strike, “but that never happened as slow economic growth persisted”.

Moore said Astrapak was going into its second half in a much stronger financial position. The group’s net debt, working capital and equity were healthy.

About 18 months into the company’s two-year turnaround strategy, Astrapak’s net debt has been cut from R571m to R327m, resulting in gearing being reduced from 56.6 percent to 29.6 percent.

“From the financial strength and liquidity position, the business is in a better position than it has been in a long time,” the chief executive said.

“Coupled with that has been the extraction of value out of our networking capital.

“As part of the two-year turnaround strategy, Astrapak rationalised and sold off some [of] its underperforming operations. This included the Hilfort Cape Town operations… and the beginning of a consultation process with stakeholders on the closure of the Denver operation.

“Over the 18 months we have seen a big improvement in the financial strength.”

Astrapak is rationalising its East London facilities as it addresses four underperforming rigids operations.

The group has completed the reorganisation of its three remaining flexibles operations.

“They are now well equipped for the end markets on which they are focused,” Moore said.

The group would start realising the benefits of the turn-around in the next six months.

Another strategy included Astrapak’s focus on growing its rigids and flexibles businesses. The rigids division delivered an 11 percent rise in revenue to R862.2m. The selling price per ton increased by 6 percent, with volumes up 5 percent.

Polymer tonnage consumed in production fell 6.6 percent to 29 396 tons because of the downsizing of the flexibles division and the elimination of low-margin business. Revenue from the flexibles operation fell by 14 percent to R283.7m following reorganisation.

“We also want to maintain our strong position in the personal care market as well as food, particularly dairy and confectionery,” Moore said.

Astrapak lost 2.21 percent to R6.20 in thin trade yesterday.

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