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Astrapak Limited - Operational Update And Trading Statement For The Six Months Ended 31 August 2014

Release Date: 19/09/2014 10:29
Code(s): APK
 
Wrap Text
Operational update and trading statement for the six months ended 31 August 2014

Astrapak Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1995/09169/07
ISIN: ZAE000096962
Share Code: APK
("Astrapak" or “the Group” or “the Company”)


Operational update and trading statement for the six months ended 31 August 2014

Operational update

Astrapak has made continued progress with the implementation of its turnaround strategy in a very
challenging and competitive operating environment for the South African plastic packaging industry.

For the six months ended August 2014 the statement of financial position reflects a debt to equity
ratio that is better than budgeted. The net working capital position is also below the budget levels,
while the trading results were tracking in line with budget as at the end of June 2014.

The strike action during the month of July 2014 had a damaging impact on the Group and the related
labour unrest, which was not limited to Astrapak or the industry, was amongst the worst that the
Group has experienced with all of Astrapak’s converting operations being affected and the majority
unable to function for almost the entire month. As detailed in the press, the wage settlement situation
is still not yet fully resolved.

The management team implemented a number of contingency plans and successfully engaged with
all relevant parties though 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 downtime, significant under recovery of costs and increased costs associated with
security and distribution.

The direct financial cost to Astrapak associated with this strike action is provisionally estimated to be
around R30 million. This represents an irrecoverable loss to the business.

Management will not let medium term financial return and customer satisfaction objectives be
jeopardised and as a result will implement measures aimed at addressing the issues resulting from
this event.

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 post the strike.

Trading statement

Astrapak is currently finalising its financial results for the six months ended 31 August 2014 (the
current reporting period).

In terms of the Listings Requirements of the JSE Limited, companies are required to provide guidance
to the market when they are satisfied that a reasonable degree of certainty exists that the financial
results for the current reporting period will differ by at least 20% from the results of the previous
corresponding reporting period.

Accordingly, shareholders of Astrapak are advised that the directors anticipate earnings per share for
the six months ended 31 August 2014 to reflect a loss of between 42.0 cents and 44.0 cents
compared to a restated loss per share of 23,4 cents for the six months ended 31 August 2013.

The directors anticipate headline earnings per share for the six months ended 31 August 2014 to
reflect a loss of between 33.0 cents and 33.3 cents compared to a restated headline loss per share of
1,5 cents for the six months ended 31 August 2013.
The principal reasons for the expected loss are as follows:

    -    The damaging effects of strike action in July, which had the effect of shutting down productive
         capacity for almost an entire month and cost the Group a provisionally estimated R30 million.
    -    Downsizing actions were taken immediately following the strike action to protect the
         commercial viability of certain operations.
    -    As previously communicated, 2015 is the second year of the two year recovery time frame
         and strategic measures continue to be implemented to ensure the success of the turnaround.
         Stakeholders are reminded that four out of thirteen businesses in Rigids were under review in
         line with changing fundamentals and to ensure Astrapak has scale within its core markets. In
         line with these reviews the following has being executed during the current reporting period:
         - As announced on the Stock Exchange News Service (“SENS”) on 18 June 2014 and on 11
         July 2014, Hilfort Plastics Cape Town was disposed of and associated retrenchment costs
         have now been expensed accordingly.
          - Consultations have commenced with stakeholders around the closure of Cinqplast Denver
         and for accounting purposes the operation was discontinued at the end of the current
         reporting period and costs associated with that have been provided.
         - Likewise, consultations are in progress to streamline operations in the Eastern Cape so as
         to eliminate loss making product lines and enable the take-on of a strategically important
         multi-year contract from a leading international customer.
         The costs relating to these strategic interventions accounted for in the period are estimated to
         be R26 million in total.

Despite the expected loss for the current reporting period, the financial position of the Group remains
sound. Net working capital days have improved to 40 days from 47 days in the corresponding period
in 2013. Net interest bearing debt has reduced from the position as at 28 February 2014 and the debt
to equity percentage is now below 30%.

The financial information on which this operational update and trading statement is based has not
been reviewed and reported on by the Company’s external auditors and represents the best
estimates of the Astrapak board.

Astrapak’s financial results for the six months ended 31 August 2014 are scheduled to be released on
SENS on Monday 29 September 2014.

Denver

19 September 2014

Sponsor:

RAND MERCHANT BANK (A division of First Rand Bank Limited

Date: 19/09/2014 10:29:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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