JSE-listed Nampak expects the sale of its glass business to conclude before the end of end of this month.

In February, Nampak 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 said last month that further portfolio rationalisation opportunities were being pursued to sharpen the focus on strategic and profitable substrates.

It provided shareholders with a trading update, which highlighted the performance of its various divisions across multiple countries.

Nampak noted that it had benefited slightly from the constrained economic environment that South Africans had endured, especially in 2018, when gross domestic product (GDP) growth was a mere 0.8%, fuel prices fluctuated and electricity prices increased, since consumers had 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 had devalued by about 85% against the dollar since September 2017, resulting in significant producer price inflation, which had, in turn, driven up consumer price inflation, while wage inflation lagged.

Consequently, demand for beverage cans softened as consumers prioritised their purchases until full purchasing power returned. Nampak expects this trend to normalise within 12 to 18 months.

In Nigeria, GDP growth had improved to 1.9% year-on-year, which had created momentum in economic activity and, consequently, Nampak’s beverage can volumes reached record production volumes. Nampak was considering doubling its nameplate capacity to two-billion cans a year.

In Zimbabwe, Nampak was closely monitoring the impact of the Reserve Bank of Zimbabwe’s monetary policy statement, which established an interbank foreign exchange market to formalise the trading of real-time gross settlement balances and bond notes with dollars and other currencies, as it might affect the company’s devaluation of earnings.

Materials

Nampak said the market in South Africa of the metals division (Bevcan) had been growing at a low, single-digit rate. The company’s volumes were 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 had reduced its nameplate capacity by 11% and removed an old tin plate line that was located in Epping, in the Western Cape, which was largely used for peak demand.

Nampak said that Divfood had experienced mixed demand. Improved vegetable and fish volumes had been offset by lower meat and diversified can volumes. However, overall volumes had 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 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 remained strong; however, the impact of the recent elections in the country, customer inventory levels and possible legislative changes might dampen volumes going forward.

Volumes in Zambia and Malawi had increased, driven by growing consumer demand, while Bullpak, in Kenya, had put in a creditable performance in spite of softer market conditions.

Meanwhile, Nampak said the majority of its operations in South Africa had not been impacted on by load-shedding, as local municipalities had prioritised the continued supply of electricity in and around manufacturing hubs. A number of smaller operations – mainly for plastics – had been impacted on to date, and production was being planned around expected power outages.