Nampak at a loss over Zimbabwe devaluation


Nampak at a loss over Zimbabwe devaluation


Published Date: 2019-11-28 | Source: Stephen Gunnion | Author: Stephen Gunnion

Nampak at a loss over Zimbabwe devaluation

The packaging group has been impacted by a decline in the value of the Zimbabwe currency that left it with a massive devaluation loss.

Nampak says it has spent the last year focusing on operational efficiencies, cost containment, right-sizing of divisions and disposals of non-core and unprofitable businesses. The measures haven't saved it from weak financial performance, exacerbated by a massive currency devaluation in Zimbabwe. Its shares fell as much as 19% with the release of its annual results yesterday.

Nampak is Africa's largest packaging manufacturer, with operations in SA, Nigeria, Angola and Zimbabwe. Over the year to end-September, it said its Bevcan business performed well in Nigeria, with double-digit market share gains and increased sales volumes. In SA, it retained a market share of more than 80% in the beverage can market, despite the entry of two new competitors. It reduced cash balances in Angola and Nigeria, where there were previously foreign currency shortages, by R3.2 billion. However, it said the availability of foreign currency remained challenging in Zimbabwe.

Revenue fell 8% to R14.6 billion in the year to end-September as good performances from its Bevcan businesses in SA and Nigeria were offset by a slowdown in Angola as a currency devaluation weighed on consumers and increased competition in its Divfood and Plastics SA businesses. Trading profit reduced by 21% to R1.6 billion due to the performance from its Metals and Paper division. The group delivered savings of R412 million due to a focus on cost containment and released R200 million from supply chain optimisation. It is aiming for a further R150 million in savings over the next 18 months.

The currency devaluation in Zimbabwe, from 2.54 to 15.20 to the US dollar, meant it had to absorb a net devaluation loss of R1 billion through its income statement. That contributed to a R390 million loss for the year, down from a R1.22 billion profit previously. Earnings per share fell 76% to 42.2c while headline EPS declined by 69% to 54.1c. Excluding the impact of the net foreign exchange losses in Zimbabwe, normalised HEPS declined by 9% to 158.3c. It doesn't plant to resume divided payments until its debt levels are significantly reduced.

The group sold its Cartons Nigeria business for R440 million and recently reached a deal to sell Nampak Glass for R1.4 billion. It said it had received indicative offers for its European plastics business, which is also up for sale. That will remove a R500 million pension fund liability from its balance sheet. Proceeds from the disposals will be used to reduce interest bearing debt and strengthen its financial position. Its gearing ratio increased to 68% from 37% due to equity adjustments and reduced cash balances following the currency devaluation for its operations in Zimbabwe.

The group said it would announce a successor to De Ruyter in the middle of next month after he resigned to take up the top position at Eskom.

Its shares retraced some of their losses to close 16% down at R5.27 yesterday.


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