ZIMBABWE – Paper and packaging giant, Nampak Zimbabwe says its capital expenditure projects remain curtailed after it suspended all credit extensions and capital injection by the major shareholder, reports the Chronicle.

In a trading update for the quarter ended June 30, 2019, the group said the capital projects of US$2.1 million, the majority of which were carried forward from the prior financial year were spent largely on replacement machinery and were internally funded.

“Capital expenditure programmes remain curtailed following the suspension of all credit extensions and capital injection by our majority shareholder, Nampak Limited of South Africa,” the company said.

However, the company reported an increase in profit margins. Its printing and converting division, Hunyani Paper and Packaging recording a 116 percent increase in revenue growth compared with the prior year.

Sales for the group finished the three-month period above prior year, attributed to inflationary pressures which resultantly boosted prices, especially by the conversion of export earnings at new interbank rates.

MegaPak revenue was up 69 percent with a significant improvement in trading income while volumes declined by 26 percent due to dampened demand from the beverage and cordials sectors and raw materials supply challenges.

It said the plastics and metals segment also performed well with Carnaud Metalbox revenue increasing by 78 percent to the prior year with significant upturn in profitability.

However, volumes declined by 18 percent compared to the prior year as raw materials supply was constrained by the illiquidity in the market. 

On the outlook, Nampak company secretary Keith Nicholson said the economy was facing strong headwinds marked by the persistent lack of foreign currency and power shortages which have hurt meaningful productivity by the company.

“The continuing scarcity of foreign exchange coupled with rising inflation presents a major challenge to the Group. Power shortages are having a severe impact on production schedules,” said Mr Nicholson.

Nampak pointed out urgent need to resolve macro-economic essentials for a meaningful transition into an environment that has manageable challenges.

Nampak said; “The economy is facing strong headwinds it is unlikely that any meaningful relief will be forthcoming to the manufacturing sector until the critical constraints are eased.”