JSE-listed Nampak expects the sale of its glass business to conclude before the end of April.
Nampak in February entered into an exclusivity arrangement with a preferred bidder – a black South African-owned company that is supported by a large international corporation with ‘significant’ glass expertise.
The sale remains subject to approval by South Africa’s competition authorities.
Nampak on Wednesday said further portfolio rationalisation opportunities are being pursued, to sharpen the focus on strategic and profitable substrates.
Meanwhile, Nampak on Wednesday provided shareholders with a trading update, which highlighted the performance of its various divisions across multiple countries.
Nampak noted that it has benefited slightly from the constrained economic environment that South Africans have endured, especially in 2018 when gross domestic product (GDP) growth was a mere 0.8%, fuel prices fluctuated and electricity prices increased, since consumers have been resorting to trading down to value and in-house brands, as well as buying greater volumes of canned fish and vegetables.
In Angola, Nampak highlighted that the kwanza has devaluated by around 85% against the dollar since September 2017, resulting in significant producer price inflation, which has, in turn, driven up consumer price inflation, while wage inflation has lagged.
Resultantly, demand for beverage cans has softened as consumers prioritise their purchases until full purchasing power returns. Nampak expects this trend to normalise within 12 to 18 months.
In Nigeria, GDP growth has improved to 1.9% year-on-year, which has created momentum in economic activity and, consequently, Nampak’s beverage can volumes have reached record production volumes. Nampak is considering doubling its nameplate capacity to produce two-billion cans a year.
In Zimbabwe, Nampak is closely monitoring the impact of the Reserve Bank of Zimbabwe’s monetary policy statement, which established an inter-bank foreign exchange market, to formalise the trading of real-time gross settlement balances and bond notes with dollars and other currencies, as it may affect the company’s devaluation of earnings.
Nampak said the metals (Bevcan’s) market in South Africa has been growing at a low, single-digit rate. The company’s volumes are further impacted on by a new entrant in the industry, which started deliveries to customers late in 2018.
A second entrant was expected to commission its plant in the second half of this year.
In response, Nampak has reduced its nameplate capacity by 11% and removed an old tin plate line that was located in Epping, Western Cape, which was largely used for peak demand.
Nampak said that Divfood has experienced mixed demand. Improved vegetable and fish volumes have been offset by lower meat and diversified can volumes. However, overall volumes have been positive.
Moreover, Plastics South Africa was performing as expected during a period characterised by lower market volumes for rigid plastics, partly being offset by improved volumes from cartons. Nampak said high-volume demand continued at its Megapak and CMB operations, in Zimbabwe, while exports to neighbouring countries have increased.
Plastics UK’s volumes continued to be impacted on by reduced demand, resulting from backward integration by key customers and an overall weaker dairy market.
In terms of paper, Nampak noted that demand at Hunyani, in Zimbabwe, remained strong and was supported by regional exports, but inflationary pressures were starting to impact on the cost of raw materials.
Carton volumes in Nigeria have remained strong; however, the impact of elections, customer inventory levels and possible legislation changes may dampen volumes going forward.
Volumes in Zambia and Malawi have increased, driven by growing consumer demand, while Bullpak, in Kenya, has put in a creditable performance in spite of softer market conditions.
Meanwhile, Nampak said the majority of its operations in South Africa have not been impacted on by load-shedding, as local municipalities have prioritised the continued supply of electricity in and around manufacturing hubs. A number of smaller operations – mainly for plastics – have been impacted to date, and production was being planned around expected power outages.