Bowler Metcalf to buy back its ‘undervalued’ shares

Plastics specialist Bowler Metcalf said on Thursday it plans to spend about R40m buying back its “undervalued” shares, remaining optimistic regarding SA’s prospects despite coming out of a period characterised by load-shedding and industrial action.

The group’s operating profit from continuing operations fell 12% and turnover 6.1% to end-June, the company said, reporting “extraordinarily high” operating costs and tight margins.

Headline earnings per share from continuing operations fell 8% to 88.1c and total profit from continuing operations fell 8% to R71.9m. Total profit, however, rose 126% to R140m. During the period the company sold its 41.4% stake in bottler SoftBev for R233m.

Bowler Metcalf, which has a market capitalisation of R607m, said on Thursday it has been presented with “numerous opportunities in recent months, and there have been some encouraging developments” with regards to the buyback.

“The volatility of the SA manufacturing space is likely to remain a regular occurring part of our life for a few years to come,” said CEO Friedel Sass. “Notwithstanding the significant challenges facing the SA business and social environment, I remain cautiously optimistic for the medium-term prospects of this country.” 

Bowler Metcalf’s share price has fallen 6.33% so far in 2019, closing at R7.40 on Wednesday.

At this price, the company is incredibly good value, but the market often simply ignores small-cap stocks, especially those in domestic consumer-related manufacturing, said Small Talk Daily’s Anthony Clark.

“The environment in plastics is cut throat, with a volatile rand affecting input costs and clients resistant to price increases, as they themselves are under consumer pressure.” 

Clark said that tight cost controls and the rise in investment income due to large cash holdings helped limit the HEPs decline.

gernetzkyk@businesslive.co.za