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Nampak making progress on R2.7bn disposals; records billions in forex, impairment losses

4th December 2023

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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JSE-listed packaging company Nampak recorded a 2% year-on-year decrease in revenue to R16.6-billion for the financial year ended September 30, while trading profit increased by 2% to R1.6-billion.

However, the company suffered a foreign exchange (forex) loss of R1.2-billion, while impairment losses of R2.8-billion adversely impacted on profitability and reduced the group's shareholder equity base by 61% to R1.6-billion.

Operating net profit before impairment losses was R276-million, which is 76% lower than the R1.2-billion in the prior financial year, with forex losses being the major contributor to this decline in profitability, the company said.

The company posted an operating loss of R2.6-billion, compared to an operating profit of R600-million in the 2022 financial year, and a headline loss of R1.6-billion.

However, Nampak recorded sustainable cash generation of R1.6-billion and saw a working capital improvement of R905-million, in part owing to a step-change in working capital disciplines.

Nampak CEO Phil Roux said the company had made progress in its turnaround plan during the year, including board and management changes, a business model review, a capital and debt restructuring programme, rights offer and a new strategy focused on its core metals business.

"We have remained resolute in ensuring that Nampak remains a critical contributor to the extensive value chain within which we participate. Significant milestones have been reached and the momentum of renewal gains traction," he said on December 4.

Additionally, in line with the criteria in the new funding package, the company is required to raise R2.7-billion through asset disposal in the next 18 months to repay interest-bearing debt. It will not seek another rights issue, he said.

Historical debt that arose from expansion activities into the rest of Africa has been separated from funding required for operational requirements with the former component to be settled from the proceeds from the asset disposal plan over the ensuing 18 months.

A funding structure utilising borrowing-based financing, underpinned by inventories and trade receivables, has been created to fund the group’s operational requirements, said Nampak CFO Glenn Fullerton.

The group saw volume reductions primarily in Bevcan Nigeria, DivFood and Bevcan SA. A 5% decrease in metals was partially offset by increases of 2% in plastics and 28% in paper.

Bevcan SA performed strongly, improving its trading profit by 28% despite a lower revenue. DivFood returned to profitability posting a R77-million improvement in its trading profit. Plastics reported a reduction in cash consumption.

Further, the company invested R86-million in establishing a new beverage can line, in Springs, to meet the growing demand for that can packaging format.

Customers have already booked capacity on the new line, owing to the growing demand for the new packaging format in South Africa, said Roux.

Meanwhile, Nampak reported a loss a share of R1 172.95 and a headline loss a share of R468.11, compared with a loss a share of R48.79 and headline earnings a share of R75.89 in the 2022 financial year.

The board decided not to declare a dividend for 2023, in line with the requirements of Nampak’s funding agreements and the objective to actively reduce net interest-bearing debt.

"In 2023, we recorded a few early wins in terms of disposals, including the disposal of the South African Plastic crates business, and of metals division properties in Tanzania and Nigeria.

"The Nigerian business, in naira, is solid and has some performance metrics that are above those we see in South Africa. The foreign exchange impairments do not slow the growth rate. It is a good business that will deliver long-term value. An investor in Nigeria could get good value from it or an external long-term investor," Roux said.

The Malawian and Zambian businesses are solid, and the liquid carton business in South Africa is exceptional.

"We are making progress on our disposals, with the first priority being disposing of the Nigerian business, and then the second priority is to dispose of the Malawian and Zambian businesses, and the liquid carton business," he said during the company's results presentation.

"In terms of our progress to date, we have seen a step-change in working capital, we have successfully merged Bevcan and Divfood, held a successful rights offer and settled our new capital structure," he said.

The macro-economic environment will remain tough, with sustained low growth and hard currency constraints in key markets.

"We will continue to strengthen our value proposition and competitor status, build cultural grit and focus on our strategic transformation agenda of One Nampak to build a high-quality business with distinctive capabilities, operating in a mostly defensive market with sustainable growth characteristics," Roux said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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