Buy in bulk, perhaps

Can investors wrap up attractive longer-term returns from Bowler Metcalf (Bowcalf) and Astrapak, two of the JSE’s smaller packaging companies?

Both have undergone radical restructuring, which might warrant a closer look at the two counters despite the immediate prospects for the packaging sector looking a little tatty. The restructurings are not driven by economic realities alone, but both companies have also had to face up to increasing international competition, which has squeezed margins.

The restructurings are vastly different. Astrapak has been rapidly disposing of noncore operations as it focuses on plastic moulding and thermoforming technologies, mainly for the personal care, food and beverages markets.

It remains a substantial company (turnover is twice that of Bowcalf), though 33% of revenue is derived from a single customer in the toiletries and personal care market.

Bowcalf, on the other hand, has profited handsomely for more than two decades by stoically sticking to its specialist plastic packaging offering to the personal care and food/beverages sectors. The company’s restructuring involves sharpening this focus by merging its soft-drink bottling subsidiary, Quality Beverages, into a new, bigger and separately managed entity called SoftBev. The company holds a stake of roughly 40% in SoftBev, which is expected to raise fresh funding by listing on the JSE next year.

The other critical difference is that Bowler’s restructuring has already achieved results, while Astrapak, though showing a R6m profit from continuing operations in the half-year to end August, is still building momentum after some large losses.

At a recent investor presentation, Astrapak CEO Robin