Nampak reports sharp profit turnaround, share price climbs 8% plus

A forklift operating at Nampak’s plant in Rosslyn, Pretoria. Photo: Nonhlanhla Kambule-Makgati

A forklift operating at Nampak’s plant in Rosslyn, Pretoria. Photo: Nonhlanhla Kambule-Makgati

Published Jul 1, 2024


Nampak’s share price shot up 8.14% on Friday after it reported a massive turnaround in operating profit to R992 million compared to the R558m operating loss in the first half of the year before.

The company has been positioning for a turnaround in the past two years, with new management, restructuring and disposals, after Africa’s biggest packaging manufacturer ran into financial difficulties following losses from expansion into other African countries.

“The group has made positive strides over the past twelve months in respect of its ambitious transformation agenda,” chief executive Phil Roux said in the results.

JSE investors have been keenly anticipating the turnaround, as evidenced by the fact that the share price traded at R285.50 on Friday, and a year before it was only 86 cents.

Revenue for the half year to March 31 increased by 7% to R6.2bn. Trading profit was 138% higher at R770m. Earnings before interest, tax, depreciation and amortisation increased 201% to R1.15bn. Headline earnings a share came to 5 393.9 cents compared with the 11 027.3 cents per share loss in the first half of 2023.

Free cash flow came to R810m compared with a cash outflow of R109m the year before.

Roux said the first half reflected progress on various strategies, including portfolio optimisation, spearheaded by divestitures and stock keeping unit rationalisation; unearthing of inefficiencies and cost reduction; strengthening of the brand proposition; and building a high-performance anatomy calibrated for learning agility.

The first half performance was driven principally by a step change in the Metals group performance, lower costs, much lower impairment losses, better working capital management and progress on asset disposals.

This was against formidable obstacles, including macro-economic headwinds in most geographies; constrained consumer demand in South Africa and Angola; unreliable municipal infrastructure; partial volume loss with two major customers; and a cyber incident that was remedied.

“Notwithstanding the aforementioned, the group results were pleasing. SA Metals performed exceptionally well due to the turnaround initiatives gaining momentum,” he said.

DivFood and Bevcan Angola reported lower revenues, but Metals recorded a 6% increase in revenue boosted by growth with Bevcan South Africa, while Plastics and Paper increased revenue 9% and 10% respectively.

Improved operating margins were achieved through portfolio optimisation and cost cuts. Operating profit was assisted by active management of the post-retirement medical aid liability, which resulted in a cost curtailment gain of R290m and lower impairments.

Impairment losses fell significantly to R13m from R793m, with an operating profit of R992m delivered compared to an operating loss of R558m the prior year.

Net finance costs decreased 7% to R459m from the reduction in debt as a result of the net rights issue proceeds of R960m received in September 2023 and net cash generated.

Discontinued operations include Bevcan Nigeria, Liquid Cartons South Africa, Malawi and Zambia, as well as the South African Plastic and Tubes businesses.

The lower losses for discontinued operations of R530m compared to the prior period loss of R1.57bn, was primarily due to reduced impairments.

“The business is, however, increasingly better positioned to compete effectively and unlock further value. We anticipate improvements and growth within the diversified portfolio as we re- engineer the business. The new capacity installed within Bevcan South Africa will be fully leveraged.

“A sustained corporate focus on scaling down and cost reduction remains an ongoing theme,” said Roux.