Johannesburg - Astrapak had finished the first phase of its two-year recovery programme, which had helped it move out of unprofitable work, the paper and plastic maker said yesterday.

The packaging company had also closed and sold off some underperforming operations.

Astrapak’s revenue increased 3 percent to R2.53 billion in the year to February, while gross profit dropped 9.3 percent to R514.1 million.

Among the factors that caused profit to fall were the increased cost of workings and loss of profit at East Rand Plastics as a result of a fire, and a write-off at Barrier Films.

Earnings before interest, tax, depreciation and amortisation at continuing operations fell 42.5 percent to R145.6m, with the margin declining to 5.8 percent from 10.3 percent.

“We are in the middle of a two-year programme… the first year was creating a platform for future growth,” chief executive Robin Moore said.

“We have also been able to release some cash and [have] reduced our gearing.”

He said steps taken in the first year of restructuring had given Astrapak some time to execute the rest of the strategy.

“From our perspective we are happy with what we have achieved. The results need some interpretation because there are issues about insurance and restructuring costs that must be taken into account.”

From a cash perspective the restructuring had not been great, Moore said. “When you look at the results we say there is about R120m overall in costs related, for example, to impairment of assets, discontinuing of some operations.”

Moore stressed that although this had had an effect on asset value, there was no massive cash outflow, so Astrapak was able to reduce its gearing quite significantly.

Net debt was reduced by R179.5m to R342.6m. The debt-to-equity ratio was cut from 41.9 percent to 29.6 percent.

Moore said the group had been able to extract quite a lot of money out of working capital, which had freed up cash.

“So it has not been a very expensive exercise in as far as restructuring is concerned, but from an accounting perspective it has had a material impact in terms of results reported,” Moore said.

However, Astrapak gave the assurance that big changes were now behind the group.

“A new operational and leadership structure is in place, the asset base and IT systems are modern and effective, and Astrapak holds leading marketing positions in its chosen markets,” he said.

The core rigids segment grew volumes by 6 percent, with total revenue exceeding R2bn for the first time. It said the important challenge had been to retain the focus on growth, business improvement and earning customer confidence while simultaneously executing the strategy.

The fire at Astrapak’s East Rand Plastics operation in January last year resulted in the company having to reposition its flexibles division, making it smaller but more profitable.

Moore said Astrapak was able to complete the insurance processes and “we now look forward to optimising returns on this revised asset base”.

The group’s shares were untraded at R7 yesterday. - Business Report