Nampak to report a mixed performance


Nampak to report a mixed performance


Published Date: 2019-09-26 | Source: Stephen Gunnion | Author: Stephen Gunnion

Nampak to report a mixed performance

The packaging group has partly offset currency volatility and weak demand with operational efficiencies.

Nampak says its full-year results will be impacted by lacklustre consumer demand and currency volatility in a number of the countries where it operates. In a voluntary trading update for the 11 months to end-August, the packaging group said the devaluation of the Angolan kwanza, the introduction and devaluation of the Zimbabwean RTGS (real time gross settlement) dollar, as well as movements in the rand against the dollar had affected its financial performance.

Despite positive growth in the second quarter of the year, Nampak said the weak local economy was still reflective of ongoing difficult trading conditions for the majority of retailers and consumer goods companies. The beverage can markets, a big part of its business, still managed to grow ahead of the economy, abating the impact of new entrants on Bevcan's market share.

In Nigeria, it said there was continued availability of foreign exchange currency and unconstrained liquidity had ensured normal cash flow from its operations there. However, it said a contracting economy and rising inflation in Angola following the devaluation of the kwanza had resulted in weak demand for beverage cans. In line with trends that were evident in Nigeria following the devaluation of the naira, it expected consumer demand to improve once wage inflation restored consumers' spending power. Economic growth in Zimbabwe was also restricted by foreign currency constraints and the ongoing drought.

For the period, it said Bevan South Africa would report a decline in revenue, and just a small dip in trading profit thanks to improved operational efficiencies. Its Metals South Africa business would report a moderate deterioration after it lost a major customer for tinned vegetables, while meat, milk and fish can volumes all improved. It's now reviewing the business to increase growth opportunities and reduce costs.

After a strong first quarter, it said Bevcan Angola reported softer volumes for the remainder of the financial year, with revenue and trading profits likely to be significantly lower as a result. Bevcan Nigeria reported strong revenue growth, helped by higher market share. In Kenya, it retrenched 19% of its staff following a turnaround intervention. And it's rationalising its Nampak Tanzania facility and plans to retrench all 79 staff.

The group's Plastics SA unit continued to experience lower sales volumes but operational efficiencies at its liquid bottles business in Isando improved following the introduction of a new senior management team. It also secured a big three-year contract to supply plastic crates to a big soft drinks manufacturer. Liquid cartons enjoyed a strong operating performance due to improved demand for packaging for milk, fruit juice and sorghum beer. Revenue and profit from the division are expected to remain flat.

Its glass business, which it's in negotiations to sell, has grown revenue in the single digits on flat volumes due constraints to its production output.

Its shares fell 2.2% to R9.29 yesterday.


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