JSE-listed packaging group Nampak on Monday reported a 48% decline in headline earnings per share (HEPS) to 107.6c for the year ended September 30, mainly owing to foreign exchange losses, which adversely impacted HEPS by 86.1c.
Basic earnings per share for the period increased by 11%, benefiting from net abnormal gains of R258-million compared with R159-million in net abnormal losses in 2015.
“The net abnormal gains were the net effect of the capital profit from the sale and leaseback transaction of R1.3-billion, the R681-million foreign exchange losses resulting from the devaluation of the naira and kwanza, as well as net impairments of R360-million,” noted CFO Glenn Fullerton.
CEO André de Ruyter noted that the unavailability of US dollars in Nigeria and Kenya made the timing and quantum of conversion from local currencies to dollars uncertain and sporadic.
During the year, the Angolan kwanza depreciated by 23% and the Nigerian naira by 58% against the dollar.
“As a result, the translation of the restricted cash to rand at the ruling official exchange rate resulted in the group incurring R681-million in foreign exchange losses,” he said.
Meanwhile, Nampak’s revenue rose 11% year-on-year to R19.1-billion, while group trading profit was up 4% year-on-year to R1.9-billion.
“The performance was owing to the turnaround at [the glass business], good trading in Nigeria and Zimbabwe, volume increases from new customers and benefits from operational improvements that resulted in improved efficiencies and cost savings,” De Ruyter noted during a presentation on Monday.
The glass business delivered a trading profit of R105-million.
He said the turnaround resulted from better efficiencies and higher sales in key market segments.
Despite volatile market conditions in beverages, as consumers came under pressure and customers adjusted their marketing activities, revenue was up 18%.
Further incremental improvements are expected as demand recovers.
Addressing the restricted cash balances in Angola and Nigeria, De Ruyter said a liquidity ratio of 77% of invoices presented for payment in the period was achieved, up from 59% in 2015, with the Isle of Man funding the shortfall through banking facilities.
“Significant improvements were made in strengthening Nampak’s balance sheet with the conclusion of the sale and leaseback transaction increasing group equity and reducing interest-bearing debt. The group’s net gearing ratio is now 49% compared with 72% in 2015,” said Fullerton.
He added that a R1.2-billion positive swing in net working capital was delivered as active inventory management yielded positive results and improved collections reduced investment in trade receivables.
Despite the continued volatility and uncertainty in key markets, Nampak remains optimistic about the long term outlook. Should macroeconomic factors stabilise, Nampak said it is in a good position to gain from substantial pent-up demand growth.
“The focus of all divisions in the short term is on achieving greater plant efficiencies, making bottles and cans profitably and maximising cash generation, while leveraging the latest-generation factory machinery, as well as good partnerships.
“Nampak will continue adjusting to the changing trading environment, while building for the future. The organisation has undergone significant restructuring and is now optimised, with most plants operating efficiently and at world class benchmark rates,” said De Ruyter.