Johannesburg - Packaging company Nampak has announced plans to reduce its property portfolio and to scrap its half-year dividend in order to reduce its debt that has increased in the past five years.
The announcement sent its share price into a tailspin, losing 13.6 percent on the JSE yesterday to close at R17.91, valuing the company at R12.36 billion.
Read: Nampak leaps on Angola deal
Chief executive Andre de Ruyter said Nampak’s debt had increased to more than R7.4bn from R16 million in 2011, increasing its net gearing from zero to 74 percent.
“The Nampak board has approved the sale and leaseback of 16 South African properties worth R1.7bn, which is awaiting approval by competition authorities,” he said.
De Ruyter said the external macroeconomic challenges in key markets were expected to prevail for the rest of the current financial year.
“Nampak is focused on ensuring this risk is adequately managed by utilising measures at its disposal, where possible, to address exposure to further currency volatility, but we cannot rule out further foreign exchange losses during the 2016 financial year,” De Ruyter said.
During the period under review, the group saw its operating profit decreasing by 7 percent to R870.1m, down from R934.6m reported in the previous period, while the group’ profit attributable to owners fell to R664.2m from R686.6m.
Its headline earnings a share from continuing operations rose almost 4 percent to 105.2 cents a share, up from 101.6 cents a share, as a result of the rising demand of its glass business.
Group revenue was up by 10 percent to R9.4bn.
Nampak, which has operations in 12 African countries, said that challenging economic conditions prompted it to forego an interim dividend and it aimed to raise R1.74bn by selling off some non-core properties.
The group said strong general cost containment measures had been put in place throughout the organisation with savings expected for the 2016 financial year.
Last month, Nampak invested more than $2m (R31.58m) into its Zimbabwe unit, which posted a $2.4m interim operating profit after benefiting from stronger demand for packaging material from the dairy, beverages and oil sectors. Nampak has a 51 percent interest in Nampak Zimbabwe and just like the other international companies in Zimbabwe has been pumping money into its Zimbabwe unit.
“Africa remains Nampak’s growth engine, with trading profit from the rest of Africa coming in at R462m, up 45 percent on the previous reporting period. The region now contributes 47 percent of group trading profit, up from 38 percent in 2015,” said De Ruyter.
“Nampak has a market capitalisation of just more than R12bn and it said in future ordinary dividend declarations would be considered having regard to the prevailing economic conditions, rest of Africa liquidity constraints, group cash flow requirements and the group’s performance outlook,” he said.
BUSINESS REPORT