Nampak reports marginal growth in revenue boosted by cost saving initiatives

Image source: Nampak

SOUTH AFRICA – Africa’s largest diversified packaging manufacturer, Nampak has reported that its first quarter revenue for the period ended December 2020, marginally rose by 1% on a year-on-year basis.

The company notes that its cost saving initiatives undertaken by the company during the 2020 financial year, yielded benefits and were complemented by higher export sales, which was reflected in the group trading profit improving by 18% relative to the previous year’s first quarter.

Nampak also reports a significant increase in operating profit for the year under review, partly as a result of the non-recurrence of adverse adjusting items.

With eased Covid-19 restrictions over the first quarter, the group’s metals division experienced healthy beverage can demand in South Africa and the export contracts secured by Bevcan South Africa were serviced as planned.

In addition, Nampak also reports that its funding covenants were complied with following the renegotiation of the group’s funding covenants during September 2020.

Nampak says it has complied with these covenants for the first measurement period ended December 31, 2020.

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Nampak’s trading profit improved by 18% in the first quarter

Nampak notes that while certain categories within its paper and plastics businesses have lost sales during the most recent ban on alcohol sales, dispensing and distribution, the impact on Nampak’s metals businesses is expected to be much less than what was experienced during previous bans.

This is the result of demand for cans from Nampak’s major customers remaining largely unaffected during the first three weeks of the most recent ban.

South Africa’s third alcohol ban, announced on December 28, 2020, was subsequently lifted on February 2 2021.

However, the company notes that the impact of the alcohol ban will still be visible in the second quarter of the 2021 financial year results, the extent of which depends on the level and pace of restocking by consumers following the lifting of the ban.

Nampak expects to release its interim results on or about May 28.

The can maker suffered a R4.3 billion (US$280.5m) full year loss in the period ended September 2020, impacted by reduced economic activity across all geographies due to COVID-19, coupled with an already weak economic climate and pressure on consumers’ disposable income.

The company’s full year revenue was down 23% to R11.3 billion (US$737m), with an overall decline of 28% in the Metal division, 6% in Plastics and 10% in Paper.

In response to the decline in revenue as consumer demand fell sharply, Nampak undertook swift management action to address employee costs and other operating costs which resulted in the capital expenditure declining by 9% to R666m (US$43.45m)

The restructuring initiatives and good working capital management enabled the company to generate R1.1 billion (US$71.7m), marginally below the prior year.

Despite yielding positive outcomes, operating profit declined from R1.4bn (US$91.3m) to an operating loss of R19m (US$1.2m), primarily due to lost gross margin on reduced volumes.

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