Astrapak : Operational update for the period 1 September 2014 to 31 December 2014

Astrapak Limited
(Incorporated in the Republic of South Africa) (Registration number: 1995/09169/07
ISIN: ZAE000096962 Share Code: APK
ISIN: ZAE000087201 Share Code: APKP ("Astrapak" or "the Group" or "the Company")

OPERATIONAL UPDATE FOR THE PERIOD 1 SEPTEMBER 2014 TO 31 DECEMBER 2014

The Group is currently in the final phase of its planned two-year recovery and continues to comfortably fund its restructuring initiatives internally. Good headway continues to be made with executive strategic interventions and other Group-wide business improvement imperatives. A rigorous approach is being taken to weed out underperformance and any areas of non- compliance. As previously communicated, this tidying up is accompanied by inevitable additional costs. Only four businesses are now responsible for a major shortfall against budget. The remaining Group businesses, in aggregate, are beginning to perform in line with management expectations for this phase of the recovery process. However, there remains a journey to travel before we meet our optimal return aspirations within 5 years, as set out in our original recovery plan.

The increased investment in shared and support services within the new structure is having its desired effects. All other overheads are well contained, assisted by the right-sizing measures.

We are well-positioned with key customers in particular focus areas and have continued achieving selling price recoveries and real volume growth on a comparable basis. Executive management is actively investing time and resources in support of key accounts.

Cash inflows for the period and year to date are healthy. Cash is being conserved through rigorous attention to detail in working capital management. Net working capital days were better than the internal benchmark of 40 days. Net debt and the debt to equity ratio continued to reduce during the period from the R325,8 million and 29,6% reported respectively as at 31 August 2014. Interest paid is reflecting a concomitant improvement too. Utilisation of credit therefore remains well below available facilities.

As reported on the Stock Exchange News Service on 3 December 2014, Astrapak has successfully disposed of Hilfort Plastics Bloemfontein and Hilfort Plastics Upington operations. This is in addition to the previous disposal of Hilfort Cape Town with effect from July 2014. The proceeds of this latest disposal were banked on 5 December and have had a further positive impact on the Group's net debt position.

The recent spate of electricity outages and load shedding has been seriously disruptive to manufacturing, presenting us with practical headaches on our production lines. Electricity disruptions have already resulted in irrecoverable downtime costs of more than R2 million and have an added consequence of negating some of the benefit of the energy saving initiatives.

The sharp decline in dollar-based global energy prices is starting to have an impact on polymer market dynamics and, in particular, the price of virgin resin. There was no impact on Astrapak during the period, due to the timing of pricing arrangements. If the prevailing trend persists it could result in a reduced cost of materials for the Group, depending on the rand: dollar exchange rate. Any benefit will be passed through to customers as determined by market relevant factors and in line with contractual price adjustment mechanisms. On a through-the-cycle basis, fluctuations in raw material pricing are broadly neutral for the Company but, in the short- term, there will be a slightly depressive effect on margin as stock manufactured at earlier input prices is delivered to customers.

We indicated at the half-year that we anticipated markets served to remain soft and unhelpful to operational performance for the year ending 28 February 2015. This is still the situation and this status is expected to remain so for the foreseeable future. Nevertheless, it is anticipated that reported earnings will begin to reflect the extent of the transformative initiatives in the coming financial year.

Shareholders are advised that the financial information contained in this announcement has not been reviewed and reported on by the Group's external auditors.

Denver
19 January 2015

Sponsor:
RAND MERCHANT BANK (A division of First Rand Bank Limited