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Transpaco's Bottom Line Growth Defies Economic Downturn

19 April 2010

Despite a weak economy JSE packaging group Transpaco Limited increased operating profit by 54% to R81 million, on a growth in turnover of 11,5% for the year to June 2009. Organic initiatives including enhanced productivity and a tight cost structure drove the exceptional increase in the group’s bottom-line, which was further boosted by the benefits of prior acquisitions and investment in plant and capacity.  Transpaco is a manufacturer, recycler and distributor of plastic and paper packaging products.
 
Headline earnings per share (HEPS) grew significantly by 83% to 167,1 cents from
91,3 cents last year. Higher operating profit saw cash from operations leap to
R147,3 million from R62,9 million.  This slashed gearing to only 11% compared to 70% at June 2008.  Further, Transpaco reduced its interest bill by almost 9%, or R1,3 million, leveraging the group’s positive cash flow and interest rate cuts in the second half of the year.  Net asset value per share (NAV) increased by 24,7% to R6,37.

In light of the healthy results Transpaco’s board has declared a final dividend of
31,5 cents a share.  The total dividend for the year of 48 cents reflects 71,4% growth year-on-year and according to CEO Phillip Abelheim “is a strong indicator of a solid performance and confidence in Transpaco’s prospects”.

He comments: “Obviously the local recessionary environment affected our operations to an extent.  However, efficient working capital management and expense control stood the group in good stead - overheads increased only so far as necessary to generate the growth in revenue.”  He adds that stringent credit management was intensified and management focused on maintaining optimal stock levels. 

Abelheim says operating profit was also upped by achieving targeted production of locally manufactured retail plastic bags at the Cape factory, which eliminated the need for imports.  Better productivity in the pallet stabilisation division added further impetus to the bottom-line.  In the previous financial year R16 million worth of new sophisticated plant was brought in, with additional capacity not yet being fully utilised.  

Looking ahead he points out that Transpaco’s low gearing makes the group highly liquid to take advantage of acquisitive and organic growth opportunities.  “We believe the current market is likely to yield interesting expansion opportunities,” he says, adding that the group has onerous vetting criteria when assessing the fit of new acquisitions.

Abelheim is cautiously optimistic that growth will continue in the year ahead and concludes:  “We intend maintaining our tight fiscal policy and exploring acquisitive opportunities to sustain our growth.”


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