SOUTH AFRICA – Africa’s largest packaging manufacturer, Nampak, reported a loss of R390m down 132% compared to last year’s profit of R1.2bn (US$81.3m), according to its annual financial results for the year ended September 30, 2019.

The results were impacted by the R1.9bn (US$128.7m) net pre-tax foreign exchange loss in Zimbabwe, and a higher-than-expected tax rate in Angola, reports Fin24.

Headline earnings per share (HEPS) declined more than two-thirds (69%) from 173.3c to 54.1c, while revenue declined 8% from R15.9bn to R14.6bn (US$0.98bn) and operating profit declined by 84% from R1.6bn (US$0.1bn) to R254m (US$17.2m).

According to outgoing CEO André de Ruyter, who has recently been named as the new Eskom CEO, during the period the group focused on operational efficiencies, cost containment, the “right-sizing” of divisions and the disposal of non-core and unprofitable businesses.

The cost control measures yielded cost reductions of R412m (US$27.9m).

On the revenue front, the performance of the group’s beverage can manufacturer Bevcan SA reported stable results, with Bevcan Nigeria delivering stellar performance with double digit volume and revenue growth.

“Our Bevcan business in Nigeria has performed well and delivered significant growth, while in South Africa we responded positively to the challenge posed by competition,” De Ruyter said.

However, the performance of Bevcan Nigeria was offset by reduced purchasing power of consumers in Angola, following currency devaluation and increased competition in the Divfood Plastics SA businesses, according to the report.

“The majority of our regions experienced constrained consumer demand and concomitant pressure on volumes,” De Ruyter said.

The group’s overall performance was negatively impacted by the currency devaluation in Zimbabwe.

“The currency devaluation in Zimbabwe had a severe negative impact on results in the rest of Africa and therefore the group,” the report read. The group had to absorb the net devaluation loss of R1bn (US$67.7m), which impacted profits.

The group has also worked to consolidate its business and reached sales agreements for its glass division, Cartons Nigeria, and intermediate bulk containers in Plastics SA. Nampak plastics Europe has also been designated for sale.

In September, the group announced it had sold its glass business in a deal worth R1.4bn (US$94.8m). The proceeds of the deal are meant to be used by Nampak to settle its debt.

The gearing ratio (debt to equity) increased from 37% to 68%, due to equity adjustments and reduced reported cash balances following the devaluation of operations in Zimbabwe.

The group said that a successor for De Ruyter is expected to be announced in mid-December, before the outgoing CEO leaves the company on January 14, 2020.