Transpaco remains resilient amid tough trading conditions

Jun 06, 2023

JSE listed paper, plastic and packaging group Transpaco announced results forthe year ended 30 June 2023 with operating profit up 13.3% to R252,5 millioncompared to R222,8 million and an operating margin increase of 9,7% versus 9,6% inthe prior year. Group revenue rose 10,8% to R2,6 billion from R2.3 billion in theprevious year on the back of growth of 7,4% in the Plastics Division and 15,0% in thePaper and Board Division.

CEO, Philip Abelheim says: “We had a good year notwithstanding a flat economy and thenegative impact of excessive load shedding. Transpaco’s pleasing results are testament to the group’s resilience and growth of both the Plastic and Paper and Board divisions.”Total comprehensive income grew by 15,7% resulting in headline earnings per shareincreasing 19,4%. Transpaco’s healthy balance sheet is attributable to the group’s continued sound investment strategy, considered capital allocation and strict working capital management. The net interest-bearing debt-to-equity position improved to net cash positive from 9,3% in the prior year.

Notably, revenue in the first six months of the financial year is traditionally greater than inthe second six months due to the seasonal nature of the business.

Load shedding during the second six months of the financial year was substantially greaterthan that of the first six months which impacted negatively on the group’s performance. This subsequently resulted in additional expenses, including diesel spend of R6 million,exceptional repairs and maintenance, overtime and greater scrap levels. Partial replacement of electricity capacity through generators or solar energy has been installed to mitigate load shedding challenges.

Transpaco’s stock holding of raw material reduced comfortably as a result of a stabilisation in the supply of plastic and paper raw material.

The board has declared a final gross cash dividend of 175,0 cents per share, resulting in total dividends of 260,0 cents per share for the year ended 30 June 2023 against 215,0 cents per share in the prior year.

In line with Transpaco’s preference of owning properties housing manufacturing operations,the group has entered into an agreement to purchase the Gauteng property from whichTranspaco Cores and Tubes operates for an amount of R44 million. The transaction isexpected to close in the following financial year.

Abelheim concludes: “Even though we anticipate challenging market conditions to persistfor some time, we intend to stick to our tried-and-true business model of focusing on organic growth, upholding rigorous financial management, and identifying and pursuing suitable acquisitions. Transpaco will look to further counter difficult trading conditions by driving sales, containing costs and maintaining gross profit contributions.”