Beverage, food and nonperishable goods packaging manufacturer Nampak will continue to tighten capital expenditure (capex) and cost controls as it enters the 2016 financial year, citing continuing volatile conditions in its primary markets, but it plans to continue its acquisitive approach to the emerging African markets.

The South African group experienced operational difficulties at its glass and Bevcan factories over the year, CEO André de Ruyter said in a statement on Thursday, adding that these were being dealt with through “targeted operational excellence initiatives”.

“We anticipate the benefits to translate into a strong financial performance in 2016 off the 2015 base, based on currently known factors.

“We have also taken decisive steps to strengthen our leadership team, refocus our portfolio, improve operational efficiencies, tighten cost and capex controls, improve project management and invest in operational leverage. This strategy
is in advanced stages of implementation, the benefits of which are expected to flow through to the bottom line in 2016,” he commented.

Describing 2015 as a “challenging” year for the group, De Ruyter held that a  period of restructuring, significant investment in Africa and in capital equipment had resulted in a more focused group that was well positioned to capitalise on investments made to date, with improvements expected in 2016.

“Tightening of fiscal discipline to optimise capital allocations and profitability will be key focus areas,” added CFO Glenn Fullerton.

The company’s businesses in Africa, meanwhile, continued to operate in a challenging macroeconomic environment, while contractual pass-through mechanisms were in place to protect the businesses from currency fluctuation, where possible.

Foreign exchange liquidity remained a concern in Nigeria and Angola and would impact 2015 results, cautioned De Ruyter.

“Despite the current significant challenges in the region caused by the decline in
commodity prices, our expansion into attractive sub-Saharan African markets will continue.

“With the region’s economy still growing above global rates and a growing, young and rapidly urbanising population, we, along with key customer partners, continue to invest to meet rising consumer demand in these higher-margin markets,” he said.

Nampak believed the demographic case for further growth in African consumer markets remained compelling and had driven its strategy to realise high-value growth on the continent through greenfield investment and acquisitions in metals, glass and rigid plastics and organic expansion in Ethiopia, Angola and Nigeria.

The company added that it expected to deliver improved financial performance in 2016, based on current market conditions, with subsidiary Nampak Glass likely to be profitable from the start of the new financial year, as it was already delivering benchmark productivity ratios.

The company’s tin can business DivFood would, meanwhile, continue to streamline its business and reduce complexity, while Nampak Plastics would continue to reduce costs and consolidate its businesses to optimise operational efficiencies, leveraging customer relationships and its geographic footprint.

Bevcan was expected to continue to deliver good volume growth with a focus on ramping up new aluminium beverage can lines.

“We are driving cultural change at Nampak to create a more supportive, collaborative and internally aligned operating company that performs as a single unit that can make better, buy better and sell better.

“I’m confident that [we can] . . . execute our strategy in a challenging environment and deliver substantially improved results during the coming financial year,” concluded De Ruyter.