SOUTH AFRICA – Nampak, a South Africa based diversified packaging manufacturer, has said that it might use proceeds from the sale of its glass business to buy back shares from shareholders.

In February, Nampak entered into an exclusivity arrangement with an unnamed preferred bidder, a black South African-owned company backed by a large international corporation with glass expertise.

The company says that it is in the final stages of negotiating the sale of the business and is likely to be finalised by the end of September, reports IOL Business

“We are in the final stages of negotiations with the buyer and expect these to be concluded by the end of the financial year,” the company said.

According to the Nampak, the decision to sell the glass business followed what the company said were a number of years of disappointing performance while noting that proceeds from the sale would also be used to reduce the company’s debt.

The company said the transaction would enable it to focus on the metals business, which generates more than 60% of the company’s trading profit.

Nampak said the transaction, which is classified as a large merger under the South African Competition Act, would be referred to the Competition Commission for consideration, and would become final once the commission’s ruling was received.

Tough economies impacting performance

As one of Africa’s largest packaging company with business across different countries in the continent, Nampak is facing tough economic challenges across the markets including liquidity problems in Zimbabwe.

Recently, the company ruled out a special dividend payment after suspending dividends in 2017 due to a lack of liquidity in Nigeria and Angola owing to the collapse in the oil price, which created shortages in foreign currency.

“We do not anticipate declaring a special dividend once the proceeds are received and are considering other ways of returning cash to shareholders including buying back shares,” the company said.

 “In turn, this resulted in limited liquidity as Nampak was not able to transfer profits generated in these countries.

“This situation is correcting itself, and during the past financial year, Nampak was able to transfer R4bn (US$286.6m) from Angola and Nigeria over the past twelve months up to March 2019,” Nampak said.

The company however says that on the back of the positive growth trends in Nigeria, it is investing US$7.16 million (R100m) into a new food can line in Lagos to be commissioned in 2020.