Transpaco 'steady' despite tough market

25 Feb 2013

Transpaco‚ a manufacturing and distribution company operating in the plastic and packaging industries‚ says it continued to deliver "satisfactory" results despite a "still challenging economic environment" in the six months ended December.

Revenue was up 10%‚ and headline earnings per share were up 2%‚ but trading during the period was "adversely impacted" by widespread industrial action in SA.

"I'm happy with the results‚" chief executive Phillip Abelheim said last week when the results were annouced. "We didn't decline like most of our peers."

But he said that soaring electricity prices and the deadly strikes in SA's transport and mining sectors had hit operations and that such costs were "difficult to pass on".

"Power in the plastics industry has become very expensive‚" he said.

However‚ most of Transpaco's factories were running 24-hours a day between five and seven days a week. But Abelheim also said he thought there was a "general decline" in retail trade in December‚ although November and January had been "fine".

However‚ overall sales in the period had grown 10%‚ he said.

Total operating profit grew slightly to R60.2m from R59.3m in the previous year.

Operating profit in the paper division continued to increase‚ but operating profit in the plastics division declined as a result of tough market conditions.

During the period the company said it generated R37.9m from operating activities. The group's net interest-bearing debt-to-equity position improved to a cash positive position‚ from 7% gearing in the previous period.

Net asset value per share increased by 13.7%. Transpaco said it would continue its "proven business strategy" by targeting organic growth‚ while maintaining strict financial controls and also pursuing "appropriate" acquisitions.

"Transpaco showed a marginal improvement in earnings when compared with the prior six months after the disposal of some loss-making operations‚" Ross Heyns‚ an equity analyst at Kagiso Asset Management‚ said.

"The plastics division operates in a more competitive space and experienced some pressure on their margins compared with the prior period‚" he said.

He added that this was partially offset by the paper and board division‚ which produced some niche products and managed a "decent increase in profitability".

Source: I-Net Bridge

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