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a south african specialistin moulding and forming
plastic packagingtechnologies
audited results
twelve months ended 29 february 2016
1
Charting a new course
audited results for the twelve months ended 29 February 2016
agenda
2
financial analysis
tradinganalysis
strategicperspectives appendix
Manley DiedloffCFO and MD
Manley DiedloffCFO and MD
Robin MooreCEO
Manley DiedloffCFO and MD
financial analysis
audited results for the twelve months ended 29 February 2016
key financial features
significant but costly footprint reorganisation complete
no continuing impairments recorded as legacy principally dealt with
net cash inflow of R176.6m from sales of non-core assets
cash generated by operating activities before change in w/c increases by 205% to R113,3m
cash generated by operations after w/c increases by 46% to R67,1m
net working capital 29 days
net debt – continuing - R111,3m (debt to equity 10.9% vs. 19.1%)
R269,2m in net realisable assets held for sale
EBITDA R116,1m (R56,5m in H1 an R59,6m in H2)
operating profit R44,3m (R22,0m H1 and R22,3m H2)
loss attributable to ordinary shareholders R3,9m vs. attributable loss of R143,3m
headline loss attributable to ordinary shareholders R17,1m vs. loss of R86,5m
4
audited results for the twelve months ended 29 February 2016
taxation rate continues to reflect turnaround and disposals
effective rate of taxation remained abnormally high at 69% (380%)
• predominantly due to capital gains on disposals and disallowable expenses
• estimated R344,5m in tax losses available to offset future profits
normal tax rate of 28% for forecasting purposes post exit from non-core businesses
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audited results for the twelve months ended 29 February 2016
disposals
2016
Cinqpet sold to Boxmore Plastics wef 30 June 2015 for R52,6m
East Rand Plastics sold to Transpaco Plastics wef 31 July 2015 for R95,7m
East Rand Plastics property wef 1 Dec 2015 R14,0m
Knilam sold to Mapflex SA wef 1 February 2016 for R22,1m
2017
sale of remaining three flexibles operations, whose performance has improved, carried over to the new financial year
surplus property disposal progressing to plan
R269,2m in net realisable assets still held for sale
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audited results for the twelve months ended 29 February 2016
continuing vs. discontinued clarifications
revenue up 4.8% like-for-like with discontinued operation Hilfort excluded from the base
EBITDA increased by 20.3% and EBIT by 42.5% on an adjusted basis
attributable loss of R17,8m, net of the following:
• operating profit R44,3m, investment income R12,2m, finance costs R35,0m, tax R14,9m, preference share dividends R12,8m, income attributable to minorities R11,8m
• headline loss R12,0m vs. R2,5m
• minorities share of R11,8m - Marcom (60/40), Weener (50/50), Plusnet (74/26)
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R'000
Continuing operations recon 2015 2016
Reported revenue 1 388 606 1 348 370 -2,9%
Revenue adjusted for Hilfort 1 286 105 1 348 370 4,8%
Reported EBITDA 127 410 116 137 -8,8%
Adjusted for:
Profit on disposal of Hilfort business -15 165 -
Hilfort EBITDA -5 566
Profit on disposal of PPE -3 326 362
IFRS - share based expense reversal -4 340 -
IFRS - share based expense 2 565
EBITDA adjusted for non-recurring headline items 99 013 119 064 20,3%
Less depreciation 65 899 71 860
EBIT adjusted for non-recurring headline items 33 114 47 204 42,5%
discontinued operations attributable profit of R14,5m and a headline loss of R5,1m
audited results for the twelve months ended 29 February 2016
financial results twelve months ended 29 february 2016
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Continuing income statement breakdownR‘000 2016 2015 change
continuing revenue* 1 348 370 1 286 105 4.8%
gross contribution 719 380 676 592 6.3%
gross margin 365 229 349 267 4.6%
gross profit 301 480 292 081 3.2%
ebitda*
operating profit*
119 064
47 204
99 013
33 114
20.3%
42.5%
net interest (22 710) (21 024) 8.0%
exceptional items 12 36 632 ↓
tax 14 887 14 891 (0.0)%
pref dividends 12 718 10 890 16.8%
minorities 11 778 5 298 122.3%
• average selling price per kg up 3.1%
• gross contribution margin 53.4% vs 48.7% due to improved efficiencies, reduction excess waste and change in product mix
• gross margin 27.1% vs 25.2%• gross margin, after accounting for
factory overhead, improved but repairs, maintenance, and temporary costs carried on turnaround higher than normal
• gross profit margin 22.4% vs 21.0%• factory depreciation up 11.5% to
R63,7m and total depreciation up 9.1% to R71,9m
• depreciation 5.3% of sales vs 4.6%• selling, distribution and
administrative overheads decreased 0.5%
• finance charges higher than anticipated due to timing of asset disposals, strategic stock build and major capex
• significantly improved result from Plusnet boosted minorities line
* adjusted for Hilfort revenue and profit in prior year, IFRS share options, PPE profit
audited results for the twelve months ended 29 February 2016
financial position
9
• debt to equity ratio has dropped from 57% in february 2012 to 11% as at 29 february 2016
• pending remaining assets disposals will result in an ungeared position
• R52,6m in capex commitments • anticipated returns from investment in
partnership with major customers will ensure positive free cash flow after allowing for cash tax, capex in line with depreciation, w/c movement, and minorities share of profits
• solid equity underpin of R1bn but capital structure sub-optimal going forward
ordinary shareholders ‘equity R’000
debt to equity % - continuing in red net debt R’000 – continuing in red
570,925
430,463
522,079
285,787
342,602325,792
192,756
63,619
111,342
0
100,000
200,000
300,000
400,000
500,000
600,000
Feb/12 Aug/12 Feb/13 Aug/13 Feb/14 Aug/14 Feb/15 Aug/15 Feb/16
56.6%
37.1%
39.9%
22.8%
29.6% 29.6%
19.1%
6.2%
10.9%
0%
10%
20%
30%
40%
50%
60%
Feb/12 Aug/12 Feb/13 Aug/13 Feb/14 Aug/14 Feb/15 Aug/15 Feb/16
1,009,431
1,161,320
1,309,914
1,252,150
1,157,107
1,161,326
1,010,362
1,030,467
1,016,958
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
1,400,000
Feb/12 Aug/12 Feb/13 Aug/13 Feb/14 Aug/14 Feb/15 Aug/15 Feb/16
audited results for the twelve months ended 29 February 2016
working capital
10
• cash retained from working capital of R12,7m vs. R59,0m• receivables down 26.8%, payables down 12.2%, stock up 33.9% (29 days vs 26 days)• strategically timed stock purchases ahead of price increases, build-up of buffer stocks in support of a
service level agreement on a new key contract and to facilitate the movement of machinery• good w/c management against the backdrop of a weakening and volatile rand• dollar-based polymer prices lower in h2 but weak rand negated benefits • ZAR/USD averaged R12,28 in h1 2016 and R14,74 in h2 - 30% weaker than h2 2015• whilst there are timing differences in pricing to customers, effective management of customer
relationships, including contractual price adjustment mechanisms, should ensure a broadly neutral effect through the cycle
net trade working capital R’000 – continuing in red net working capital days – continuing in red
344,941
315,534
623,324
322,380
285,622249,101
99,754
105,403
108,110
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Feb/12 Aug/12 Feb/13 Aug/13 Feb/14 Aug/14 Feb/15 Aug/15 Feb/16
49.8
43.4
48.7
53.2
46.0
40.0
26.2
30.2
29.3
0
10
20
30
40
50
60
Feb/12 Aug/12 Feb/13 Aug/13 Feb/14 Aug/14 Feb/15 Aug/15 Feb/16
trading analysis
Manley DiedloffCFO and MD
audited results for the twelve months ended 29 February 2016
volumes and selling prices
12
• volumes of 28 269 tons vs. 28 569 tons• mix improvement in manufacturing and
customers + improved pricing• selling price per kilogram of R50,98/kg vs
R49,45/kg, up 3.1% • pricing a function of a number of
variables, including mix, currency, world dollar polymer prices and customer arrangements
• management of pricing, procurement coordination and demand forecasting continued to improve
sales volumes in tons – continuing
pricing in rand per kilogram – continuing
49.45 49.3850.98
25.0
30.0
35.0
40.0
45.0
50.0
55.0
Feb/15 Aug/15 Feb/16
28,569
14,007
28,269
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Feb/15 Aug/15 Feb/16
audited results for the twelve months ended 29 February 2016
trading features
13
R’000 revenue * ebitda * margin
F’16 1 348 370 4.8 F’16 119 064 20.3 F’16 8.8%
F’15 1 286 105 % F’15 99 013 % F’15 7.7%
• group reports only a rigid plastic packaging segment with flexibles businesses reported under discontinued operations
• gross contribution - 11.7% reduction in cost of materials due to less waste, improved converting efficiencies and exit from low margin business
• cost of energy and utilities up only 3% - efficiencies
• delays commissioning a new FMCG contract - R55m invested
• loss of indirect UHT yoghurt cup export volumes, difficulties in oil-dependent Angola
• customer
• commenced a multi-year supply agreement with a large existing multinational FMCG customer - R81m invested, capacity installed, optimal volumes and profitability to follow
• additional multi-year contracts in place with local and international FMCG customers
• discontinued Bronkhorstspruit, adjacent deodorant ball factory consolidated at JJ Precision site in KwaZulu-Natal
• capacity associated with relocation of Bronkhorstspruit plant to KwaZulu-Natal will be absorbed through commitments on asset utilization from the existing customer base
• customer
* adjusted for Hilfort revenue and profit in prior year, IFRS share options, PPE profit
strategic perspectives
Robin Moore CEO
audited results for the twelve months ended 29 February 2016
business environment
15
business environment deteriorated further in h2 - negative political factors, depreciating rand, elevated risk, higher interest rates despite a weak economy, fragile consumer and business confidence
labour framework in SA and international quality demands are an incentive for manufacturers to deepen capital intensity
electricity outages and load shedding disruptive in h1 but diminished in h2
competitive conditions intensified in the local packaging market, some aggressive pricing evident
timeliness of restructuring – tough economy, heightened competitive pressure
despite negative macros major multinationals are positioning for the long term and line of sight on volumes is encouraging and underscores the strategy
no immediate plans for a direct other Africa presence, only indirect through customers with local and international reach
audited results for the twelve months ended 29 February 2016
CEO’s key insights from the year
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post-turnaround focus
building on the achievements of f2015, and we have made good progress
a stronger platform, without which top quartile returns are impossible
exiting from remaining non-core assets, costly footprint reorganisation complete
process of eliminating excess expenses deliberately incurred to facilitate recovery underway
executing on major projects aligned to the customer focus
intensified customer engagement a priority and it remains so
gross contribution and gross profit, reflective of improving productivity and mix
much less “noise” in the numbers, a fairly clean result
operating profit still subpar due to:
remaining excess turnaround expenses
costs of discontinued operations carried until transfer
relocation of 28 machines - expense, inefficiency
major new projects on stream later than envisaged
head office closure process, required structures with slimmer future cost base established in Durban
despite challenges and delays, reorientation up the value chain proceeding and in line with the strategic purpose of the reengineering and the internationally benchmarked goals communicated in detail previously to stakeholders
audited results for the twelve months ended 29 February 2016
perspective – past and future
2016 and beyond
of R92m in head office costs R30m in corporate costs associated with turnaround and not a feature going forward
R16m relates to once-off cost of last phase of rationalisation and consolidation of factories, waste, catch-up maintenance
targeting R35m in future EBITDA from capital invested in major projects and asset transfers based on the Group’s targeted return on capital, as previously communicated, and existing commercial arrangements
capex wisely invested to strengthen the base business and win significant new business
2013 to 2016
R213m in impairments
R32m in critical safety upgrades
R200m in major capex for key customers
R70m in footprint optimisation and modernisation
R80m in normal capex
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audited results for the twelve months ended 29 February 2016
outlook
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level 3 B-BBEE contributor but new codes a challenge for many companies
management anticipates realising accelerating returns from major projects aligned to multi-year contracts with top-tier customers and cost savings related to efficiencies and head office – quantified as R81.0m on annualised basis
medium term EBITDA margin aspiration of 12% to 15% with operating profit margin 7% to 10%
reasonable proportion of volume relatively defensive
Astrapak has earned leading market positions in food, personal care and toiletry, and automotive in particular
additional cash inflow from remaining asset disposals will strengthen balance sheet further
exploring options for future surplus cash and an optimised capital structure for balance sheet
recommencement of ordinary dividends a goal
the group is well invested in appropriate and current technologies, leading to a relatively high barrier to entry at prevailing exchange rates
Thank you
appendix
audited results for the twelve months ended 29 February 2016
Moulding technology
• bottles and closures though extrusion blow-moulding + decorative options
• injection moulded closures and containers, tooling for production of own moulds
• personal -care and pharmaceutical grade components using swing-plate injection moulding for closures and injection blow-moulding for containers
• extrusion blow-moulded containers for lubricant and petrochemical applications
• multi-polymer containers for varying applications
• injection-moulded hollow deodorant bottle balls in joint venture with German company Weener
• personal–care injection blow-moulding and extrusion blow-moulding
• jars, closures and tubes for personal-care
audited results for the twelve months ended 29 February 2016
Thermoforming technology
• thermoformed receptacles for food and beverage grade applications + decorative options
• British Retail Consortium accredited facilities offering thermoformed containers of varying sizes and applications typically for local and export food markets
• thin-wall injection-moulded tubs, containers, lids, cups for dairy applications – with in-mould labelling and off-set decoration in joint venture with Shalam Packaging
audited results for the twelve months ended 29 February 2016
markets served and customer concentration
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market served contribution to Astrapak sales
food 45%
personal care/toiletry 32%
automotive 15%
beverage 2%
household 4%
industrial 2%
pharmaceutical 1%
tobacco 1%
customer contribution to sales
customer 1 35%
all other customers 65%
audited results for the twelve months ended 29 February 2016
debt recon
24
R'000 continuing liabilities of assets combined
ops held for sale
Long-term interest bearing debt 162 245 32 188 194 433
Short-term interest bearing debt 76 765 26 924 103 689
Bank overdraft 389 0 389
Cash and cash equivalents 128 057 128 057
Total equity 1 076 644 0 1 076 644
Non-controlling interest 59 686 0 59 686
Net Debt 111 342 59 112 170 454
Equity 1 016 958 1 016 958
Net interest bearing debt as a percentage of equity 10.9% 16.8%
Charting a new course