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Operational update for the period 1 September 2014 to 31 December 2014
Astrapak Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1995/09169/07
ISIN: ZAE000096962 Share Code: APK
ISIN: ZAE000087201 Share Code: APKP
("Astrapak" or "the Group" or "the Company")
OPERATIONAL UPDATE FOR THE PERIOD 1 SEPTEMBER 2014 TO 31 DECEMBER 2014
The Group is currently in the final phase of its planned two-year recovery and continues to
comfortably fund its restructuring initiatives internally. Good headway continues to be made with
executive strategic interventions and other Group-wide business improvement imperatives. A rigorous
approach is being taken to weed out underperformance and any areas of non-compliance. As
previously communicated, this tidying up is accompanied by inevitable additional costs. Only four
businesses are now responsible for a major shortfall against budget. The remaining Group
businesses, in aggregate, are beginning to perform in line with management expectations for this
phase of the recovery process. However, there remains a journey to travel before we meet our
optimal return aspirations within 5 years, as set out in our original recovery plan.
The increased investment in shared and support services within the new structure is having its
desired effects. All other overheads are well contained, assisted by the right-sizing measures.
We are well-positioned with key customers in particular focus areas and have continued achieving
selling price recoveries and real volume growth on a comparable basis. Executive management is
actively investing time and resources in support of key accounts.
Cash inflows for the period and year to date are healthy. Cash is being conserved through rigorous
attention to detail in working capital management. Net working capital days were better than the
internal benchmark of 40 days. Net debt and the debt to equity ratio continued to reduce during the
period from the R325,8 million and 29,6% reported respectively as at 31 August 2014. Interest paid is
reflecting a concomitant improvement too. Utilisation of credit therefore remains well below available
facilities.
As reported on the Stock Exchange News Service on 3 December 2014, Astrapak has successfully
disposed of Hilfort Plastics Bloemfontein and Hilfort Plastics Upington operations. This is in addition to
the previous disposal of Hilfort Cape Town with effect from July 2014. The proceeds of this latest
disposal were banked on 5 December and have had a further positive impact on the Group's net debt
position.
The recent spate of electricity outages and load shedding has been seriously disruptive to
manufacturing, presenting us with practical headaches on our production lines. Electricity disruptions
have already resulted in irrecoverable downtime costs of more than R2 million and have an added
consequence of negating some of the benefit of the energy saving initiatives.
The sharp decline in dollar-based global energy prices is starting to have an impact on polymer
market dynamics and, in particular, the price of virgin resin. There was no impact on Astrapak during
the period, due to the timing of pricing arrangements. If the prevailing trend persists it could result in a
reduced cost of materials for the Group, depending on the rand : dollar exchange rate. Any benefit will
be passed through to customers as determined by market relevant factors and in line with contractual
price adjustment mechanisms. On a through-the-cycle basis, fluctuations in raw material pricing are
broadly neutral for the Company but, in the short-term, there will be a slightly depressive effect on
margin as stock manufactured at earlier input prices is delivered to customers.
We indicated at the half-year that we anticipated markets served to remain soft and unhelpful to
operational performance for the year ending 28 February 2015. This is still the situation and this
status is expected to remain so for the foreseeable future. Nevertheless, it is anticipated that reported
earnings will begin to reflect the extent of the transformative initiatives in the coming financial year.
Shareholders are advised that the financial information contained in this announcement has not been
reviewed and reported on by the Group's external auditors.
Denver
19 January 2015
Sponsor:
RAND MERCHANT BANK (A division of First Rand Bank Limited
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