astrapak results presentation financial year ended 28 february 2011 10 & 11 may 2011
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ASTRAPAK RESULTS PRESENTATIONFINANCIAL YEAR ENDED 28 FEBRUARY 2011
10 & 11 May 2011
DISCLAIMERForward looking statements• This presentation might contain forward-looking statements that involve subjective judgment and analysis and are
subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to Astrapak. Forward-looking statements can generally be identified by the use of forward-looking words such as “may”, “will”, “expect”, “intend”, “plan”, “seeks”, “estimate”, “anticipate”, “believe”. “continue”, or similar words.
• No representation, warranty or assurance (express or implied) is given or made in relation to any forward looking statement by any person (including Astrapak). In addition, no representation, warranty or assurance (express or implied) is given in relation to any underlying assumption or that any forward looking statements will be achieved.
• Actual future events may vary materially from the forward looking statement and the assumptions on which the forward looking statements are based. Given these uncertainties, readers are cautioned not to place undue reliance on such forward looking statements. In particular, we caution you that these forward looking statements are based on management’s current economic predictions and assumptions and business and financial projections. Astrapak’s business is subject to uncertainties, risks and changes that may cause its actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. The factors that may affect Astrapak’s future performance are discussed each year in the annual report.
• These forward looking statements speak only as of the date of this presentation, subject to any continuing obligations under applicable law or any relevant stock exchange listing rule. Astrapak disclaims any obligation or undertaking to publicly update or revise any of the forward looking statements in this presentation, whether as a result of new information, or any change in events conditions or circumstances on which any statement is based.
AGENDA
STRATEGIC & BUSINESS REVIEW M BAGLIONE
FINANCIAL REVIEW M DIEDLOFF
SEGMENTAL REVIEW M BAGLIONE
OUTLOOK M BAGLIONE
Q&A
SITE VISIT
JOHANNESBURG CINQPLAST DENVER
CAPE TOWN PLASTFORM
INTRODUCTION, STRATEGIC & BUSINESS REVIEW
M Baglione
STRATEGIC REVIEWStrategy
The Astrapak 10 Point plan:
• Introduced in 2009;
• Focused on:- Building core competencies;- Strengthening the business model;- Manufacturing science;
• Model aimed at delivering improved and sustainable financial performance.
BUSINESS REVIEW
Internal review:
• What went wrong in 2011?- Poor execution of certain items in 10-point plan;- Poor cost management;- Change programme too ambitious for the team and culture in
certain businesses;- Industrial action & retrenchments.
• What corrective measures have been taken?- Senior management changes;- Structural changes;- Group Procurement & Group System Analyst appointed.
BUSINESS REVIEW
External review:
Which external factors impacted on the business ?
• Difficult trading conditions throughout the year due to pressures on disposable income;
• Major customers under severe pressure: branded versus in-house;• Tough trading conditions for customers delayed major projects already
invested in by Astrapak – benefits will now only be realized in future periods whilst associated costs were incurred in current period by the Group;
• Customer procurement strategies;• Significant increases in input pricing – issues above impacting severely on
ability to pass on price increases timeously;• Competitor activities.
BUSINESS REVIEW
External review:
What steps are being taken in an attempt to combat or reduce the impact of such external factors?
• Investment strategies being implemented to increase group exposure to non-branded and in-house products;
• More scientific approach adopted to dealing with customers and customer procurement strategies;
• Actively engaging with customers to implement strategies to increase customer market share;
• Structural cost base changes & further cost extraction initiatives;• Energy Management Committee established and already adding value in energy
utilisation strategies;• Group Procurement and Procurement Committees actively engaging with
international supplier base.
FINANCIAL REVIEW
M Diedloff
Financial SummaryMain features of reported results:
• Volume growth of 4.9%;• Continued downward pressure on margins due to trading environment;• Growing cost base mainly due to energy, labour and depreciation;• Raw material prices increases – more material in latter half of the year;• Industrial action and retrenchment costs of R 45 million;• Strong cash and treasury management resulting in lower net interest
cost;• Gearing remains in 30% range;• Dividend unchanged at 26.4 cents per share - > distribution policy (21.8
cents – 21% above).
FINANCIAL PERFORMANCESUMMARY
Statement of Comprehensive Income 2011 2010 change
Revenue 2,705 2,613 > 3.5%
Volume growth >4.9%
Selling price growth < 1.4%
EBITDA* 331.2 396.8 < 16.5%
EBITDA margin 12.2% 15.2%
Operating profit 190.3 267.8 <28.9%
Operating margin 7.0% 10.3%
Net finance cost 31.8 42.0 < 24.3%
Interest cover 6.0 times 6.4 times
Profit for year (continued & discontinued) 109.8 129.3 < 15.1%
EPS (continuing operations only) 73.4 109.1 < 32.7%
HEPS (continuing operations only) 73.5 116.9 <37.1%
Ordinary dividend 26.4 cents 26.4 cents unchanged
Preference dividend 768.40 cents 898.87 cents < 14.6%
* Includes estimated R 35m loss due to industrial action and R 10m retrenchment costs
HEPS, Dividends & Yields
Dividends & HEPS
20112010
0.020.040.060.080.0
100.0120.0
35.9
22.6
26.4 26.4
73.5
116.9
Dividend / HEPS (%)Dividend per share (cents)HEPS (cents)
Dividend Yield & Share price
20112010
- 2.00 4.00 6.00 8.00
10.00 12.00 14.00
2.97 2.03
8.90
13.00
Dividend yield (%)Closing share price (Rand)
FINANCIAL PERFORMANCESUMMARY
Statement of Financial Position 2011 2010 change
Total equity (R’000) 1,080.5 991.3 > 9.0%
Total assets (R’000) 2,148.3 2016.0 > 6.6%
Net interest bearing debt (“Net Debt”) 340,3 287,8
Net Debt as % equity 32.7% 30.0%
Net debt / EBITDA 1.0x 0.7x
Net working capital days 41.5 36.8Exceeds 37 day target mainly due to strategic stock holding representing 3.2 days -R23.6m
Net asset value per share (cents) 868.0 808.0 > 7.4%
Net tangible asset value per share (cents) 743.0 682.0 > 8.9%
Closing share price 28 February (cents) 890 1010 < 11.9%
Gearing & Net working capital
Gearing, Net Debt & Equity Net working capital & days
2011 2010 2009 -
50
100
150
200
250
300
350
304264
219
41.536.8
29.4
Net working capitalWorking capital days
2011 2010 2009 2008 20070
200
400
600
800
1,000
1,200
32.7 30.1 52.6 71.9 33.4
340288
442
562
288
1041
958 840
782
863
Gearing Net debtEquity
FINANCIAL PERFORMANCESUMMARY
Cash Flow Statement 2011 2010 change
Cash generated by operations 338.5 412.3 < 17.9%
Dividend distributions 44.1 15.7 > 180.9%
Investment in working capital 51.9 37.9 Strategic stockholding as at 28 February
Capital expenditure 223.1 227.5
Net cash and cash equivalents 28 February 84.6 140.4
Differential of R 55.8m mainly due to:- Add dividends of R 28.4m
- Strategic stockholding of R 23.6m
FINANCIAL REVIEWStatement of Comprehensive Income
R'000Reviewed
28 February 2011Audited
28 February 2010 % change
CONTINUING OPERATIONS
Revenue 2,705,377 2,613,000 3.5%
Cost of sales (2,129,876) (1,959,502) 8.7%
Gross profit 575,501 653,498 -11.9%
Administration, distribution, selling and other costs (385,205) (376,488) 2.32%
Profit from operations before exceptional items 190,297 277,010 -31.3%
Exceptional items - (9,250)
Profit from operations 190,297 267,760 -28.9%
Net finance costs (31,775) (41,953) -24.3%
Profit before taxation 158,522 225,807 -29.8%
Taxation (49,080) (75,884)
Profit for the year from continuing operations 109,442 149,923 -27.0%
DISCONTINUED OPERATIONS
Profit/(loss) for the year from discontinued operations 360 (21,394) -101.7%
Profit for the year from all operations 109,802 128,529 -14.6%
FINANCIAL REVIEWStatement of Comprehensive Income
Reviewed 28 February
2011
Audited 28 February
2010 % changeNumber of ordinary shares in issue ('000) 135,131 135,131 Number of preference shares in issue ('000) 1,500 1,500 Weighted average number of ordinary shares in issue ('000) 119,928 118,618 1.1%Fully diluted weighted average number of ordinary shares in issue ('000) 122,909 121,590 1.1%
Earnings per ordinary share (cents) 73.7 90.1 -18.2% - continuing operations 73.4 109.1 -32.7% - discontinued operations 0.3 (19.0) -101.6% Fully diluted earnings per ordinary share (cents) 71.9 87.9 -18.2% - continuing operations 71.6 106.4 -32.7% - discontinued operations 0.3 (18.5) -101.6%
Headline earnings per ordinary share (cents) 73.8 108.9 -32.2% - continuing operations 73.5 116.9 -37.1% - discontinued operations 0.3 (8.0) -103.8% Fully diluted headline earnings per ordinary share (cents) 72.0 106.3 -32.3% - continuing operations 71.7 114.1 -37.2% - discontinued operations 0.3 (7.8) -103.8%
Ordinary dividend declared (R’000) 35,675 35,675 - Ordinary dividend per ordinary share (in cents) 26.4 26.4 -
Preference dividend paid and accrued (R’000) 11,526 13,483 -14.5% Preference dividend per preference share (cents) 768.40 898.87 -14.5%
FINANCIAL REVIEWStatement of Financial Position
R’000Reviewed
28 February 2011Audited
28 February 2010%
changeNon-current assets 1,262,666 1,177,094 7%Property, plant and equipment 1,053,330 974,331 Deferred taxation 17,144 12,465 Goodwill and trademarks 149,700 149,712 Loans and investments 42,492 40,586
Current assets 885,655 838,882 6%Inventories 290,003 252,971 Trade and other receivables 511,007 434,108 Cash and cash equivalents 84,645 140,422 Assets classified as held for sale - 11,381
Total assets 2,148,321 2,015,976 7% Total equity 1,080,543 991,335 9%Equity attributable to ordinary shareholders of the parent 898,083 815,797 Preference share capital and share premium 142,590 142,590 Non-controlling interest 39,871 32,948
Non-current liabilities 417,195 434,073 -4%Long-term interest-bearing debt 257,892 278,972 Long-term Financial liabilities 1,671 20,044 Deferred taxation 157,632 135,057
Current liabilities 650,583 590,568 10%Trade and other payables 474,580 423,612 Shareholders for preference dividends 8,994 9,668 Short term interest-bearing debt 167,009 149,212 Liabilities relating to assets held for sale - 8,076
Total equity and liabilities 2,148,321 2,015,976 7%
FINANCIAL REVIEWStatement of Cash flows
R'000Reviewed
28 February 2011Audited
28 February 2010 % change
Cash generated from operations 338,461 412,267 -18%
Increase in working capital (51,938) (37,932)
Non-cash transactions 98 (14,689)
Net financing costs and taxation paid (73,924) (121,497)
Net cash inflow before distributions to shareholders 212,697 238,149
Dividend distribution to shareholders (44,055) (15,705)
Net cash inflow from operating activities 168,642 222,444 -24%
Capital expenditure (223,144) (227,502)
Net movements of investments, subsidiaries and non-controlling interests (3,411) 2,149
Proceeds on the disposal of assets held for sale - 144,645
Proceeds on the disposal of property, plant and equipment 3,559 8,040
Net cash outflow from investing activities (222,996) (72,668)
Net cash outflow from financing activities (1,423) (119,416)
Net (decrease)/increase in cash and cash equivalents (55,777) 30,359
Net cash and cash equivalents at the beginning of the year 140,422 110,063
Net cash and cash equivalents at the end of the year 84,645 140,422 -40%
SEGMENTAL REVIEW
SEGMENTAL PERFORMANCE
RIGIDS
Turnover PBIT PBIT margin
-
200
400
600
800
1,000
1,200
1,400
1,600 1,433.0
186.0
0.1
1,344.0
206.0
0.2
2011 2010
Factors impacting results:Challenges:• Major customers under pressure
resulting delays in capital projects and decline in anticipated volumes;
• Customer procurement strategies;• Technology change at Weener-
Plastop;• PET operations underperformed.
Positives:• Continued growth in market share;• Major projects awarded for 2012;• Preferred supplier status.
SEGMENTAL PERFORMANCE
FLEXIBLES
Turnover PBIT PBIT margin
-
200
400
600
800
1,000
1,200
1,400 1,272
5 0
1,269
71
0
2011 2010
Factors impacting results:Challenges:• Historical re-investment rate;• Poor strategic leadership;• Culture change;• Industrial relations.
Positives:• Leadership changes;• Special investment of R 106m
approved;• Science in manufacturing.
OUTLOOK
M Baglione
OUTLOOKTrading environment
Challenges• Oil / polymer prices;
• Energy cost increases : 25%+ per annum;
• Labour costs and nationwide industrial action;
• Change in interest rate cycle anticipated.
Polymer pricing ($)
10/05/01 10/08/01 10/11/01 11/02/011000
1200
1400
1600
1800
2000
LDPE HDPE
OUTLOOKA Strong platform for earnings growth
• Market leading position in chosen industries;
• Strong customer relationships with preferred supplier status;
• Broad geographic footprint;
• Strong technology platform;
• Defensive business.
OUTLOOK
MANAGEMENT FOCUS FOR 2012:
• Execute on 10 point plan;• Maximise returns from Flexible special investment;• Delivery on delayed and newly awarded projects – Rigids; • Optimise cash: destocking & collections;• Restoration of gross margins;• Rationalise cost base – structural and other cost savings;• Improve return on equity.
QUESTIONS
THANK YOU
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