In light of the current macroeconomic circumstances, packaging company Nampak has delivered a “credible” financial performance for the year ended September 30, CEO André de Ruyter said on Tuesday, adding that the company had increased its trading profit by 2% to R2-billion.
He further noted during a conference call that, although Nampak’s revenue decreased by 2% year-on-year to R18.8-billion, an adjusted constant currency basis would have resulted in revenue growing by 6%, while profit would have been up by 12%.
“It was really the stronger rand that caused us to report [that] revenue [was] down slightly,” he pointed out.
Meanwhile, referring to the significant 86% decrease in earnings a share, De Ruyter explained that the drop to 36.6c apiece, although a “big number” was as a result of an abnormal, one-off capital profit of R1.3-billion on the sale and leaseback of properties in the prior year, as well as increased impairments.
“Obviously, this year, that profit could not be repeated,” he stated.
Meanwhile, De Ruyter said that while the company’s beverage can manufacturing operations achieved good results, the other divisions faced adverse conditions in a climate of reduced demand and tough trading conditions.
Economic headwinds resulted in reduced consumer spending on food characterised by lower trading volumes, product substitution and downsizing to smaller sizes.
While beverage can demand remained largely unaffected by economic challenges in South Africa and Angola, with De Ruyter calling it the “star of the business . . . where we have seen a sterling performance”, the company’s plastics business faced some challenges.
“That is predominantly related to challenges that we experienced in the UK,” he noted.
Key management changes were introduced at Plastics Europe resulting in steady progress in improving operational performance and diversifying the customer base.
“We forecast that, for the coming financial year, we will be in a break-even situation,” said De Ruyter.
Glass traded reasonably well in the first half, but lost momentum in the second half of the financial year, with irregular electricity supply from March to August having a major impact on costs. A strategy is in place to address production challenges.
“We expect the assistance of operational specialists and a high-level management intervention to result in improvements in operational efficiencies.”
South Africa is expected to remain in a tough economic and trading environment with low gross domestic product growth forecast for the next year.
In anticipation of the delayed sugar tax legislation, Nampak is working closely with major customers to assess the possible impact on their businesses and how this will change packaging requirements.
The company did not declare a dividend.