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a south african specialist in moulding and forming plastic packaging technologies audited results twelve months ended 29 february 2016 1 Charting a new course

a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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Page 1: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

a south african specialistin moulding and forming

plastic packagingtechnologies

audited results

twelve months ended 29 february 2016

1

Charting a new course

Page 2: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 3: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

Manley DiedloffCFO and MD

financial analysis

Page 4: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 5: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

5

Page 6: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

6

Page 7: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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)

7

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

Page 8: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

audited results for the twelve months ended 29 February 2016

financial results twelve months ended 29 february 2016

8

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

Page 9: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 10: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 11: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

trading analysis

Manley DiedloffCFO and MD

Page 12: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 13: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 14: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

strategic perspectives

Robin Moore CEO

Page 15: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 16: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

audited results for the twelve months ended 29 February 2016

CEO’s key insights from the year

16

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

Page 17: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

17

Page 18: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

audited results for the twelve months ended 29 February 2016

outlook

18

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

Page 19: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

Thank you

Page 20: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

appendix

Page 21: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 22: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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

Page 23: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

audited results for the twelve months ended 29 February 2016

markets served and customer concentration

23

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%

Page 24: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

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%

Page 25: a south african specialist in moulding and forming plastic ... · PDF filein moulding and forming plastic packaging technologies ... minorities R11,8m •headline loss R12,0m ... capital

Charting a new course