Nampak progresses turnaround despite African currency headwinds

The Plastics and Paper division results remained turbulent; comparable net debt levels were lower and lender covenants were being complied with. Photo: Supplied

The Plastics and Paper division results remained turbulent; comparable net debt levels were lower and lender covenants were being complied with. Photo: Supplied

Published Feb 16, 2024


Nampak, Africa’s largest packaging group that is being restructured due to financial difficulties, needs to sell three key assets as its operations are not yet sufficient to put the group back on a sustainable growth trajectory, CEO Phildon Roux said yesterday.

He was responding to shareholder questions at the annual meeting in Cape Town yesterday afternoon.

Opportune Investments chief investment officer Chris Logan had asked how the sale of its Nigeria business was progressing, and if it could be sold at a reasonable price given the big decline in the value of the Nigerian naira, which might also discourage potential suitors.

Roux said he was sure they would find a suitable partner, and talks on the disposals were progressing. He said the type of partner they were looking for would understand the volatility in Nigeria and be able to “see through the cycle”. He said the long-term outlook for the country was favourable, with current conditions a “feeding frenzy”.

Roux was also asked what had caused “other players to eat Nampak’s lunch” considering that Nampak was the only beverage can maker in South Africa in 2018 and currently there were four manufacturers.

Roux said he was not part of the management at the time, but that their competitors “will not enjoy eating our lunch indefinitely” and he suspected that overheated margins had attracted other competitors, and a degree of arrogance about being market leaders, as well as high overhead costs, were possibly to blame for competitors moving into Nampak’s markets.

He said the days of being a large conglomerate might be over because companies could not succeed if they were not able “to get close to their market” and companies also needed to be “very agile” to succeed.

Describing the rigours on the executives of ongoing turnaround at Nampak, he said “to get the flywheel of corporate actions going and at the same time implement a massive transformation, phew, we’re panting!”

Meanwhile, a trading statement that the Bevcan SA and DivFood subsidiaries delivered operational and trading performance improvements through margin management, cost reduction and efficiency gains, in the first quarter to December 31, 2023.

There had also been a volume recovery at Bevcan Angola. Reduced forex losses, which had heavily impacted profit in the last year, contributed to an improvement in operating profit.

The asset divestiture programme was proceeding in line with previous guidance. A number of smaller disposals were concluded and proceeds used to repay debt.

Volumes contracted in Nigeria due to macroeconomic conditions.

The Plastics and Paper division results remained turbulent; comparable net debt levels were lower and lender covenants were being complied with.

Turnover growth in South Africa was muted due to the challenging economy, port congestion impacting raw material imports and customer factory closures occurring sooner and for extended periods.

Slower-than-expected consumer demand was exacerbated by surplus inventory in the market. Demand was expected to normalise in the second quarter as customers replenished inventory holdings.

Lower-than-expected turnover did not detract from the newly merged Bevcan South Africa and Diversified division performing well and generating strong operating leverage.

The South African Metals operations improved profitability with Bevcan efficiency gains being key enablers. Beverage can volumes were in line with the comparable period.

The installation of the incremental 500ml capacity at Bevcan Springs was on track for commissioning ahead of time and within budget. This capital project would enable volume growth.

The turnaround plan for DivFood was ahead of group expectations with profitability improvements expected.

In Paper, the demand for conical and PurePak cartons fell in South Africa, albeit from a strong base the prior year.

Zambia and Malawi were negatively affected by lower demand for conical cartons and crates and foreign exchange losses. The Zimbabwe operations continued to perform well in local currency.

Across the group, planned cost and efficiency savings were realised.

In terms of restructured lender agreements, the group was on track to meet a debt repayment obligation of R243 million by March 31, 2024, with R180m already repaid from proceeds on the disposal of the Nampak Nigeria Metals property and the UK apartment.