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19 April 2010
By improving operational efficiencies JSE-listed Transpaco weathered tough trading conditions to post continued growth in operating profit to R54 million for the six months ended December 2009 (“the period”). Transpaco is a manufacturer, recycler and distributor of plastic and paper packaging products. Organic growth in both divisions and strong cash generation through focus on working capital contributed to the pleasing performance.
Both earnings per share and headline earnings per share were up 18% year-on-year, the latter to 124,6 cents. The group successfully countered a 4,4% decline in turnover (due to a drop in the global pricing of plastics raw materials) by increasing sales volumes. Transpaco also reduced its interest payments by almost R6 million using its healthy cash flows, which together with the strong bottom line slashed gearing to 6% from 53% at December 2008.
The results saw the declaration of a 25 cents a share interim dividend, up 52% on the same time last year. CEO Phil Abelheim says that while the dividend reflects the group’s performance, the extraordinary rise is not a precedent-setting move reflecting a change in the group’s dividend policy. “The board took a strategic decision to reduce the disparity in prior years between interim and final dividends. However, our dividend policy remains prudent and we will maintain the same dividend cover year-on-year when averaged across the whole year.” Put simply, the dividend is now increasing in the first half of the year and will balance in the second half to maintain the same annual dividend cover as in prior years.
Abelheim says he is satisfied with the group’s performance and attributes the ongoing growth to continued spotlighting of cost control, utilisation of assets and working capital management. “There is no magic formula for overcoming a harsh economy,” he says realistically. “Growth is sustained by concentrating on business basics – watching expenses, driving sales and sweating our machinery and plant for maximum productivity. Transpaco is also continuing to reap the benefits of the growth strategies put in place during previous periods.”
He is optimistic going forward notwithstanding that growth is traditionally weighted towards the first half of the year, and anticipates an improvement in trading conditions to year-end in June 2010. He concludes that the group will carry on pursuing acquisitions in related niche markets to augment future growth and bolster returns for shareholders.
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