Astrapak posts loss as it faces challenge in implementing turnaround strategy

A CHALLENGING year lies ahead for Astrapak as the management team proceeds with a plan to turn around the struggling packaging firm’s fortunes, MD Manley Diedloff said on Friday.

“Our plan to optimise our operations as part of our turnaround strategy is progressing well, but it is important to note that the first year is expected to be difficult,” he said.

Astrapak is in the first year of a two-year recovery plan for its “flexibles” business, a strategy led by CEO Robin Moore.

This includes the rationalising and restructuring process that includes discontinuing nonperforming assets.

“The flexible side (of the business) is a problem for Astrapak, and the strategy is getting smaller revenues, but increased profits,” Mr Diedloff said.

Following a disappointing financial year in which there was a fire that ravaged its Brakpan factory in February, the Johan- nesburg-based company reported a loss for the six months to August, as it discontinued some of its underperforming operations.

“Our focus is … on making sure we are in the right market. I think we are pretty much one of the strong players in the plastic packaging market,” Mr Diedloff said.

Revenue from continuing operations rose 1.2% to R1.22bn compared with last year.

A 5.4% drop in volumes was cushioned by the rise in the average selling prices.

Astrapak posted profit before interest, tax, depreciation and amortisation from continuing operations of R95.3m, down 25.2% from last year.

The company incurred a depreciation charge of R51.8m, 8.3% lower than last year’s, with capital expenditure of R62.7m also down, by 10%, as it scaled back its expansion plans.

Revenue from its “rigids” business rose 15% to R894m in line with volume growth, while in the “flexibles” business revenue came in lower as the group scaled down on the operations.

Initiatives in respect of commonality in pricing and procurement co-ordination were rolled out in the period, and the company was confident that an improvement in the productivity of its supply chain will lead to improved profitability and market competitiveness.

The company, however, noted the market continued to be hallmarked by subdued pricing power and the challenge of recovering rising input costs, such as polymer and electricity.

Despite its shortcomings, Astrapak said its modern production equipment and information technology systems, together with its established countrywide presence with leading market positions, were among its strengths.

Mr Diedloff said the company had set targets for the “flexibles” business over the duration of the review period, which would inform management’s decisions.

“Initial focus is on fixing the fundamentals of the business, and then after we will look at organic or acquisitive growth,” he said.