SOUTH AFRICA – Africa’s leading diversified packaging manufacturer, Nampak, has reported a 21% rise in revenue in full year ended September 2022 to R16.9 billion (US$974m) lifted by higher volume sales and unusually high commodity prices.
Revenue from its Metals division increased by 30% to R12.9 billion (US$743.6m)and trading profit grew by 17% to R1.3 billion (US$749.4m) as demand increased in all key markets — South Africa, Nigeria and Angola as its Paper division, attained a 3% rise in revenue to R1.1 billion (US$57.65m).
On the flip-side, earning at its Plastic division decreased by 1% to R3.0 billion (US$172.9m), largely due to lacklustre economic activity, prolonged strikes at our major customers and ad hoc raw material shortages.
Despite the strong contributions from its beverage cans and liquid paper businesses, an increase in foreign exchange losses, higher interest rates and increased impairments contributed to a lower net profitability.
Nampak incurred net forex losses of R542 million (US$31.2m), primarily from Nigeria. In Angola, US dollar availability was good and the kwanza strengthened by 28%.
Operating profit before net impairments of R1.2 billion (US$69m) decreased 4% due to capital and other items of R459m (US$26.4m), inclusive of forex losses and the R70m net impact of Zimbabwe’s currency devaluation.
Operating profit of R640m declined 31% from R931m (US$53.6m), having absorbed net impairment losses of R512m (US$29.5m), with R392m (US$22.6m) attributable to the impact of increased global risk premiums and higher interest rates on Nampak’s weighted average cost of capital (WACC).
Net impairment losses related mainly to DivFood SA, Rigid Plastic, Bevcan Angola and Metals Nigeria. Net finance costs increased by 21% to R586m (US$33.7m) from R485m (US$27.9m) due mainly to the higher investment in net working capital, interest rate increases and interest costs of R64m (US$3.69m).
A loss of R26m (US$1.5m) was incurred compared to a profit of R377m (US$21.7m) in the prior year. EPS swung to a loss of 23.1 cents from a profit of 32.1 cents and HEPS declined by 42% to 35.9 cents.
Erik Smuts, CEO of Nampak, noted that efforts to dispose of certain assets yielded no tangible results preventing Nampak from reducing debt and required the extension of certain maturity dates and relaxation of covenants.
Nampak will approach shareholders for approval for a rights issue of up to R2.0 billion (US$112.6m) during the course of the first quarter of 2022.
He said, “With a strengthened balance sheet, we can focus on our operations to leverage growth opportunities for the benefit of our stakeholders.”
The proposed financing will be challenged towards repaying lenders R1.35 billion (US$76m), and upgrade a beverage can line in South Africa with R350 million (US$19.72m) to add needed production capacity to satisfy the unprecedented growth in beverage can demand.
In addition to that, the company seeks R150 million (US$8.45m) to provide operating flexibility, as the group is currently operating with inadequate capacity to handle seasonal fluctuations in working capital requirements.
A further R150 million (US$8.45m) will be channelled towards to cover the estimated transaction costs of both the refinancing and the proposed rights offer.