DURBAN - DIVERSIFIED packaging manufacturer Nampak revealed yesterday that its profits tumbled 56 percent for the year to end September on the back of R4 billion impairments in Nigeria and Angola and the Covid-19 outbreak.
The group said that its trading profits fell to R682 million from R1.56bn during the comparable period last year. Nampak said that the year had been the most challenging on its operations as the impact of Covid-19 took effect in the second half of its financial year.
“Most of the countries we operate in went into hard economic lockdown towards the end of March as governments grappled with limiting the spread of the virus,” the group said.
Last year, the group posted R148m in impairments.
Nampak said that its revenue declined 23 percent to R11.3bn, with all three segments reporting losses for the period.
It said that the metal division revenue fell 28 percent while the plastics unit eased 6 percent and the paper segment fell 10 percent.
The loss increased more than 100 percent to R4.3bn compared with last year’s R390m, with headline loss of 78 cents a share compared with headline earnings per share of 54c reported a year earlier.
Chief executive Erik Smuts said the group performance was impacted by the reduced economic activity across all geographies because of the Covid19 pandemic, coupled with an already weak economic climate and pressure on consumers’ disposable income.
“We continued to operate as allowed by regulations and implemented safety measures to mitigate the impact of Covid-19.
“In South Africa, the ban on alcohol products for three months negatively impacted the sale of beverage cans, paper conical cartons, closures for wine and spirits, and other products deemed as non-essential during this period,” Smuts said.
The group said hat it was also hurt by the currency devaluation of the Zimbabwe dollar and hyperinflation.
It said total impairments surged to R4bn including an impairment of R2.2bn of Bevcan Nigeria’s goodwill and an asset impairment of R1.2bn in Angola, due to depressed consumer demand
In South Africa, the group said lower expected cash flows and a higher weighted average cost of capital resulted in asset impairments of R187m in DivFood and R423m in Plastics and an impairment of R37m of goodwill attributable to Divfood.
Smuts said Nampak planned to keep capital expenditure to a minimum without compromising their ability to produce high-quality products for customers given a well-capitalised asset base to assist the group’s deleverage plan.
“The renewal of major long-term supply contracts will assist Nampak to defend our market share in key markets while large export contracts will boost profitability in financial year 2021,” he said.
Nampak shares declined 5.84 percent on the JSE yesterday to close at R1.45.
BUSINESS REPOT