Financial Mail - Investors Monthly - - Opening Bell - Marc Hasen­fuss

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.