Nampak’s full year revenue feels the pinch of COVID-19 falling by 23%

SOUTH AFRICA – Africa’s largest diversified packaging manufacturer, Nampak has suffered a R4.3 billion (US$280.5m) full year loss 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 group revenue for the year ended September 2020 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.

ADVERT

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.

The group results were also adversely affected by the significant currency devaluation of the Zimbabwe dollar and hyperinflation.

Nampak’s revenue for the year ended September 2020 was down 23% to R11.3 billion (US$737m).

Its total impairments of R4.0 billion (US$260m) included an impairment of R2.2bn (US$130.4m) of Bevcan Nigeria’s goodwill and an asset impairment of R1.2bn (US$78.2m) in Angola due to depressed consumer demand, resulting from the significant fall in the oil price, lagging wage inflation, changes in pricing dynamics, COVID-19 and other risks as well as an increased weighted average cost of capital.

In South Africa, lower expected cash flows and a higher weighted average cost of capital resulted in asset impairments of R187m (US$12.2m) in DivFood and R423m (US$27.5m) in Plastics and an impairment of R37m (US$2.4m) of goodwill attributable to Divfood.

Overall Nampak recorded headline losses per share of 78 cents and 88 cents from continuing operations and total operations respectively, compared to a headline earnings per share of 54.1 cents and a headline loss per share of 19.4 cents in the prior year.

Looking ahead, the company plans to keep capital expenditure to a minimum without compromising on their ability to produce high quality products for its customers.

Nampak has also undertaken renewal of major long-term supply contracts under its Bevcan SA and Bevcan Nigeria which will assist it to defend its market share in key markets and boost profitability in F21.

In addition, site consolidations in Plastics SA and the restructuring of DivFood is set to be completed in the next year which will further boost its earnings.

ADVERT

A joint venture signed with Elopak in the year under review will allow Nampak to grow its footprint of gable top cartons in sub-Saharan Africa in the year to come, particularly in fresh and aseptic beverage markets.

“The strategic building blocks – a strengthened capital structure, simplification, optimisation, innovation and growth – will reshape Nampak into a sustainably profitable and appropriately capitalised company to exploit future investment opportunities,” said Nampak CEO Erik Smuts.

Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. SUBSCRIBE HERE

Related posts

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.