SOUTH AFRICA – Nampak, Africa’s largest diversified packaging manufacturer, has recorded impressive results in the six months ended March 31, despite the ongoing restrictions on trading caused by the Covid-19 pandemic.

The can maker’s headline earnings per share (HEPS) for the first half year period, has jump significantly to 17.6c, from 0.3c registered in the corresponding period in 2020.

Growth in the group profitability was driven by its strategy to simplify and optimise operations, coupled with working capital management and prudent capital expenditure, which resulted in substantially improved cash generation.

“We made good progress towards achieving our strategic goal of improving our risk profile as we reduced exposure to US dollar debt.

“The simplification of the group and optimisation of operations delivered positive results, as all businesses focused on refining operating structures and reducing fixed costs. Further savings are expected for the remainder of FY21 and into FY22,” stated Erik Smuts, Nampak CEO.

Despite of the improvement in performance, the group revenue was unchanged at R6.5 billion (US$472m), as the growth in the Metals division in Nigeria and South Africa were muted by subdued performance from other operations in the rest of Africa such as in Angola.

Export sales boosted revenue at Bevcan South Africa and revenue was also up in DivFood South Africa and stable in the Plastics division and Zimbabwean operations.

“The simplification of the group and optimization of operations delivered positive results, as all businesses focused on refining operating structures and reducing fixed costs.”

Erik Smuts – Nampak CEO

Nampak makes profit of US$12.42m

Cash generated from operations was up 19% to R852m (US$61m) with net working capital inflows of R21m (US$1.53m) relative to R76m (US$5.52m) outflow in the comparative period.

Proceeds from the disposals of Glass division and Cartons Nigeria contributed to gross debt reducing by 32% to R5.8 billion (US$421m) from R8.5 billion (US$617m) in March 2020 and exposure to US dollar funding decreased to 48%.

Capital expenditure of R153 million (US$11.1m) was 62% lower. Despite increasingly constrained availability of foreign currency in Nigeria, R848m (US$61.6m) cash was transferred from Angola and Nigeria, but constraints in Zimbabwe resulted in minimal cash transfers.

Trading profit improved by 11% to R706m (US$57.29m), largely as result of strong cost saving initiatives.

Operating profit increased by 89% to R543m (US$39.45m), mainly due to the reduction of net devaluation losses from exchange rate movements, lower retrenchment and restructuring costs and non-recurrence of capital items.

Included in operating profit were impairments of R14m (US$1.02m), finance costs of R271m (US$19.69m), reduced finance income of R16m (US$116,000), primarily due to significantly lower interest received on US-linked kwanza bonds, and income tax of R101m (US$7.34m).

Profit for the period increased to R171m (US$12.42m) from a R2.9 billion (US$210m) loss in the comparative period.

The company anticipates a stronger second half than last year as improved trading conditions and the benefits of cost savings initiatives should result in a much-improved performance in South Africa.

Demand in Nigeria is expected to remain strong for the remainder of the year.

Also, Nampak’s group simplification, site consolidations and operational relocations is expected to be completed before the end of FY21, improving its profitability and establishing an efficient platform for Nampak’s future growth.

“Our strategic objectives to reduce risk and grow profits will be prioritised and we will use proceeds from asset disposals, along with cash generated, to further reduce debt.

“In line with our strategy and market developments we are re-evaluating our capital structure, not only to meet covenants, but specifically as an enabler of future growth,” Erik concludes.

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