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South Africa: Astrapak Pays for Higher Input Costs
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Business Day (Johannesburg)
14 May 2008
Posted to the web 14 May 2008
Thabang Mokopanele
Johannesburg
PLASTIC packaging manufacturer Astrapak yesterday reported a 35% decline in headline earnings per share for the year to February as a result of lower margins, higher working capital costs due to ongoing polymer price increases, the slowing economy and interruptions in power supply.
However, turnover rose 27% to R2,8bn over the previous year with acquisitions accounting for 10% of the increased turnover, while 9% was mainly due to price increases related to the recovery of higher raw material costs.
CEO Ray Crewe-Brown attributed the weak results to an inability to pass increased input costs through to customers and slower sales in the second half of the year. This was fuelled by rising interest rates and mild summer temperatures, which affected beverage demand.
Unscheduled load shedding of electricity also had a negative effect on production, customers' ability to receive and fill the product, and on suppliers' ability to produce and supply raw materials.
Profit from operations increased marginally to R229,5m from R228m, but the resultant operating margin reduced to 8,1% from 10,3%.
Operating overheads increa-sed 22% mainly as a result of the acquisitions but also as a result of increased capacity, distribution costs associated with increased fuel prices, wage increases in excess of inflation and a rapidly increasing cost environment.
Net interest paid of R74,7m was significantly higher than the R48,3m paid in the previous year as a consequence of escalating interest rates and increased borrowings resulting from the utilisation of acquisition funding, capital expenditure and higher working capital requirements.
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"We are very pleased with the volume growth of 8%, which can be attributed to market share gains driven by our investment in new projects and the fact that plastic packaging is maintaining its market position, despite increasing costs," Crewe-Brown said.
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