Share price: 707c JSE code: APK
SELL ASTRAPAK IS TRADING AT NEARLY HALF of its peak price of R13.50 in mid-2010. In the 2010 financial year headline earnings were more than 100c/share. But can the company, in the final throes of a two-year turnaround phase, aspire in the medium term to those earnings levels off a slimmed down operating base? Astrapak listed in the late nineties, and built a formidable packaging presence by bolting on a variety of niche operations. But the company buckled under tougher trading in recent years, necessitating a radical revamp to the operational structure.
Although recent interim results show Astrapak on a sounder financial footing, it is not out of the woods. Perhaps most worrying is the crimping of the gross margin to 16.3% (from 19.5% previously) — highlighting just how packaging companies are being squeezed by clients determined not to pass on exorbitant price increases to cash-strapped consumers.
Astrapak executives have argued that reported interim numbers do not, as yet, reflect the extent of the transformative initiatives undertaken. That might be true. But even if the big challenges are behind Astrapak, it needs time to sharpen its competitiveness. It has the tricky task of focusing on assets holding scale and technological advantages in core markets — especially where business can be clinched on “fair and sustainable terms”. The recovery will come… eventually. But of the three counters under review we’ll parcel off Astrapak.