Bowcalf and Astrapak reap rewards

Astrapak CEO Robin Moore.

Image source: Financial Mail

This week, the companies reported much improved sets of results that reflect restructuring efforts to reshape the respective businesses for sustainable profit performances.

Astrapak - mainly a moulding and thermoforming specialist - reported an attributable profit of R20m in the half-year to end-August compared with a comparative loss of 43.2c in the corresponding period last year. The headline number was whittled to 6.5c from 33.1c per share in the previous interim period.

More importantly, CEO Robin Moore highlighted that strong operational cash generation together with proceeds from asset disposals had markedly reduced gearing to just 6% (last year: 30%).

The company realised R125m in net cash inflow from the sale of noncore assets, while cash generated by operations increased 89% to R64m.

Moore noted: "This is the healthiest financial position reported by the group in many years and positions Astrapak to take advantage of potential growth opportunities."

Astrapak's margin also fattened to 8.9% (previously 8.1%).

The performance was "acceptable" in the context of a weak trading environment, Mr Moore said. Astrapak was midway through a five-year turnaround strategy to right-size the business and deliver sustained profit.

He stressed that a significant amount of costs associated with the turnaround remained in headline earnings. These were recorded as normal running expenses while discontinued operations continued to incur costs until ownership changed.

"The process of closure, disposal and consolidation is proceeding to plan, with further cash proceeds to be realised during the period."

Opportune Investments CEO Chris Logan said Astrapak's share price (unchanged at R3.78 yesterday at 3.27pm) suggested the market was waiting for the turnaround effort to find more traction. "It's turning around, but clearly there is still work to be done."

Bowcalf showed a 29% hike in earnings from continuing operations to R72m (87c per share) for the year ended June. Turnover was up a sprightly 18% at R489m.

Logan said Bowcalf's results were a pleasant surprise. "It seems the company got its act together a lot quicker than the market expected."

Bowcalf CEO Friedel Sass said the year under review was a watershed period for the company. "We undertook a corporate action which resulted from the reassessment of our strategy of vertical integration into the beverage industry."

The company sold its softdrink bottling venture Quality Beverages into a new entity, SoftBev, and retained an influential stake in the business.

The company had been awarded R360m in long-term contracts, Sass said.