Astrapak results negatively impacted by fire

This will impact an extensive review of the business by new CEO Robin Moore‚ and new MD Manley Diedloff‚ as part of a two-year recovery plan.

The group said on Tuesday its results were affected by two significant events - the nationwide transport strike in September and October last year‚ and the blaze at East Rand Plastics.

It said the transport strike caused an estimated R30m in lost revenues. It also said the fire at East Rand Plastics damaged the group's flexible plastics division as a whole.

Sine then it had taken mitigating actions‚ which included outsourcing production‚ inter-group production‚ and the re-commissioning of certain mothballed equipment.

But it said force majeure had to be declared in terms of certain customers and markets specific to East Rand Plastics.

"Due to the consequent reduction in turnover the cost base of the East Rand Plastics business has also been reduced‚" Astrapak said.

"The insurance assessment process has now been completed and all the relevant insurers have admitted liability in respect of the claim‚" it said.

Astrapak said it had conservatively accounted for R295m worth of insurance claims at the end of February‚ and R148m had already been received.

The fixed assets destroyed in the fire at East Rand Plastics amounted to R56m.

It said revenue from continuing operations was R2.6bn‚ up from R2.5bn last year‚ or a 3.9% rise. The increase in turnover was mainly because of a 4.2% increase in volumes over the previous year.

But profit from operations before exceptional items fell 29.2% from R163m to R116m. Operating margins fell from 6.5% to 4.4%.

Astrapak said the fall in operating margin was mainly a result of the decline in the operating margins of its rigids plastics division. This was severely affected by under-recoveries in selling prices and the procurement strategies of customers‚ it said‚ including the use of international benchmarking and tender procedures.

The group highlighted various "inefficient and uncompetitive" assets‚ which it said caused write-downs in value of R92m. It also said the results reflected the increased cost of operations‚ mainly raw materials‚ energy‚ labour and distribution costs.

It said this accounted for the decline in gross profit to 17.4%‚ from 20.5% in the same period last year.

It also said this reflected the continued challenges it faced to recover its increasing cost base through increased selling prices‚ in a highly competitive market.

The group said the loss from discontinued operations represented net losses incurred in the current year in respect of its City Pack and Ultrapak units‚ which were classified as discontinued operations last year.