Safety concerns force Astrapak to shift from PVC to Pet

- Last updated on GMT

Related tags: Mergers and acquisitions

Consumer concern in South Africa about the potential seeping of
harmful compounds from PVC plastic into the food which it is
wrapped around has prompted a shake-up in the country's leading
plastics packaging group, Astrapak, said CE Ray Crewe-Brown.

Consumer concern in South Africa about the potential seeping of harmful compounds from PVC plastic into the food which it is wrapped around has prompted a shake-up in the country's leading plastics packaging group, Astrapak, said CE Ray Crewe-Brown.

He told analysts yesterday that, although there was no proof that PVC was unsafe, a backlash had begun in Europe against the use of this form of plastic in applications where it came into contact with food, and SA consumers were expected to follow this trend.

The result is that Astrapak is now shifting facilities for producing food-related packaging into the slightly more expensive PET plastic, which could cost about ten per cent more.

"This trend is inevitable. It started in the Netherlands and Switzerland and is now moving to Sweden, Denmark, Germany and Britain," said Crewe-Brown.

He said that the production of plastic bottles for mineral waters and soft drinks had already switched to PET, and that Astrapak would consolidate its strength in this market through its new R124 million (€13.3m) acquisition of a 75 per cent stake in Master Plastics, with its large PET facility.

Meanwhile, an existing Astrapak business, Emcape-Thermopak, in which the company has recently boosted its holding, has also switched from PVC to PET production, through a R14m investment.

This company produces plastic trays on which salads, fruit and vegetables were packed. "Our other businesses have been in PET for some time,"​> said Crewe-Browne.

He said that the move away from PVC was driven by larger customers and SA's exporters of food, which needed to meet demands of foreign consumers and retailers.

Crewe-Brown said that Astrapak's gearing had risen from 27 per cent to more than 100 per cent with the funding of the Master Plastics deal, but he expected that this would be paid off within five years.

Any further acquisitions could be funded through share issues.

SA's two largest packaging firms, Nampak and Malbak, are planning to merge, and Crewe Browne said he would be closely following the response of the Competition Tribunal to the merger.

The competition authorities have the option of approving the deal on condition the merged entity sells off some of its operations.

He also said some customers of Nampak and Malbak might be uncomfortable dealing with a dominant player in the SA market, and were already sourcing supplies from Astrapak to maintain a competitive environment and to keep their options open.

"They like having at least two suppliers,"​ he said. Astrapak's share price staged a spectacular 15.38 per cent leap to R3 yesterday following the recent announcement of impressive annual results for the year to February.

There had been a 17 per cent improvement in revenue and a 20 per cent increase in headline earnings a share.

Related topics: Food Safety & Quality

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