Nampak shares rise 21% despite tough conditions
DURBAN - Nampaks's share price rose more than 21 percent on the JSE on Friday despite Africa’s largest diversified packaging manufacturer suffering an impairment charge of R3 billion in Angola and Nigeria in six months to the end of March.
The group said an impairment of R2.2bn was attributable to goodwill in Nigeria and an asset impairment of R800 million in Angola.
The impairments pushed the group into a loss of R2.86bn, resulting in a loss of 408.9 cents a share. Last year, the group reported a profit of R844m.
Chief executive Erik Smuts said the weaker demand in key markets, pressure on consumers’ disposable income and net impairments of R3bn negatively impacted these results.
“Although the Nigerian outlook has since deteriorated, Bevcan Nigeria enjoyed volume growth, but Divfood, Bevcan Angola and Bevcan SA performed below expectations due to total market contractions and loss of a key customer.
“The SA Plastics business returned to profitability. While tough economic conditions have inhibited revenue and trading profit growth, cash generation improved. Capital
expenditure was tightly controlled, with the most significant expenditure on the conversion of the steel beverage line in Angola to aluminium,” Smuts said.
He added that R1.6bn net proceeds from the disposal of non-core assets and healthy cash transfers from Angola and Nigeria would be used to reduce debt.
The share price climbed to R1.36 a share on Friday, up from Thursday’s closing price of R1.12. The stock closed 2.68 percent higher at R1.15.
In South Africa, Nampak said it operated as an essential service provider under the lockdown regulations, with its plants continuing to operate in most of its markets.
Smuts said the company had been affected by reduced consumer demand, the shift towards preserving cash by customers and the ban on alcohol.
“Demand in South Africa was lower than expected over the festive season, and weak economic growth continued into 2020.
“Bevcan Nigeria performed well initially, with good operating efficiencies and pleasing demand for the first quarter, despite a slowing economy.
“The Angolan economy continued to be materially impacted by currency devaluations, with lagging wage inflation impacting buying power, resulting in significantly lower demand.
“Hyperinflation, currency shortages and lack of economic growth impacted Zimbabwe’s performance,” Smuts said.
Revenue declined 17 percent to R6.5bn due to weaker economic conditions in South Africa, Angola and Zimbabwe. Operating profit fell 68 percent to R287m due to tough trading conditions, increased competition and foreign exchange movements.
Smuts said Nampak’s strategy included a significant simplification of the business and reducing earnings volatility through optimisation of their regional footprint, business portfolio and capital structure.
“We are prioritising cost-saving measures, preserving cash, reducing capital expenditure and are considering fast-tracking restructurings to improve profitability,” Smuts said.