SOUTH AFRICA – Africa’s largest packaging manufacturer, Nampak, has reported a drop in revenue by 17% to R6.5billion (US$372.4m) for the six months ended March 2020, primarily due to weaker economic conditions in South Africa, Angola and Zimbabwe.
The groups operating profit fell by 68% to R287 million (US$16.4m), due to tough trading conditions, increased competition and foreign exchange movements.
Trading profit fell 39% to R633m (US$36.2m), as a result of a loss in Divfood, reduced demand in Angola and the overall beverage can market declining in South Africa.
The group swung into a loss of about R2.4bn (US$137,500) from profit of R653.3m (US$37.4m) previously recorded. Headline earnings for continuing operations amounted to 7cps.
The company said in a statement that trading margins declined to 9.7% from 13.1%, primarily due to reduced profitability in Metals for continuing operations.
During the period under review, Nampak transferred R1.6 billion (US$91.6m) from Nigeria and Angola, representing cash transfer rate of 124% of the opening cash balances.
Capital expenditure for continuing operations increased 13% to R407m (US$23.3m), mainly for the conversion of the line in Angola from steel to aluminium.
Nampak swiftly implemented measures from the end of March to mitigate some of the COVID-19 impact on the second half of the year.
These include a freeze on most capital expenditure, optimising working capital by bringing inventory levels in line with reduced demand, optimising trade finance arrangements, extending payment terms with suppliers, the rightsizing of operations in line with reduced demand, assessing alternatives to improve profitability and increased scrutiny of all expenditure.
Turning to the outlook for the rest of year, Erik Smuts, Nampak CEO said, “The heightened uncertainty as a result of COVID-19 and the impact of individual country’s responses increases the difficulty in predicting the Group’s 2020 performance. “
“We are prioritising cost saving measures, preserving cash, reducing capital expenditure and are considering fast tracking restructurings to improve profitability,” Smut said.