Zimbabwe weighs heavily on Nampak


Zimbabwe weighs heavily on Nampak


Published Date: 2019-11-26 | Source: Stephen Gunnion | Author: Stephen Gunnion

Zimbabwe weighs heavily on Nampak

The packaging group will report a loss from total operations due to foreign exchange losses in Zimbabwe and higher tax in Angola.

Nampak has warned of a sharp fall in full-year earnings, weighed down by a hefty foreign exchange loss in Zimbabwe and higher taxes in Angola. Its shares fell as much as 11%.

In a trading statement, the packaging group said earnings per share (EPS) from continuing operations for the year to end-September would be 74-79% lower than last year's restated 176.7c, while headline EPS would be between 67% and 72% below the restated 173.3c it reported for 2018. It said the comparative results had been restated to reclassify its European plastics division from continuing to discontinuing.

Earnings and headline earnings for continuing and discontinuing operations would reflect a loss, the group said. Headline earnings exclude capital profits and impairments but include foreign exchange losses and onerous contract provisions.

The group said earnings had been impacted by the application of hyperinflationary accounting to its operations in Zimbabwe, where it also suffered a R1.9 billion net pre-tax foreign exchange loss. In Angola, it faced a higher than anticipated effective tax rate due to a change in legislation that capped the deductibility of losses from foreign exchange movements. It was also affected by net impairment losses on property, plant and equipment.

Other companies that have been forced to adopt hyperinflationary accounting in Zimbabwe include cement producer PPC, while video entertainment business MultiChoice's interim results were also impacted. Yesterday, Pepkor said it had exited Zimbabwe after its PEP Africa division incurred losses there.

In a pre-close update in September, the group said the weak local economy was still reflective of ongoing difficult trading conditions for the majority of retailers and consumer goods companies. In September, it reached a deal to sell Nampak Glass for R1.5 billion to Isanti Glass, a joint venture between black-owned investment company Kwande Capital and SABSA Holdings, the SA holding company of SA Breweries.

Last week, the group announced that Andre de Ruyter had resigned with effect from 15 January next year to take up the CEO role at Eskom. It expects to announce his successor later this week. It releases its results tomorrow.

Its shares recovered some of their losses to close 5.9% down at R6.75. They have fallen 51% this year.


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