Nampak keeps the faith

• Operating efficiencies are better and company has a close eye on costs, says CEO at half-way stage

Nampak CEO Andre de Ruyter said the company felt vindicated by its substantial investments in the rest of Africa, particularly Nigeria and Angola, in the six months to March.

Nampak CEO Andre de Ruyter says the company feels vindicated by its substantial investments in the rest of Africa, particularly Nigeria and Angola, in the six months to March.

The diverse packaging group enjoyed record sales of beverage cans in Angola, improved results from Bevcan in Gauteng, robust Nigerian general metal packaging markets, upbeat liquid packaging in SA and buoyant paper packaging in Zimbabwe.

Despite a difficult general trading environment — with R2.4bn of cash frozen in Nigeria and Angola — group operating profit soared 30% to R1.1bn in the period, while trading profit rose 12%. An improvement in operational performance helped overall margins grow to 11.9%, from 10.5% in financial 2016.

Nampak’s share price rose 16.47% in late trade on Tuesday.

“A major achievement is we were able to improve our operating efficiencies, and managed costs very closely,” De Ruyter said on Tuesday.

The improvement in results came despite a 10% strengthening in the average rand-dollar exchange rate.

Trading conditions across Africa were sluggish, denting consumer confidence, and group revenue was down 1% to R9.3bn in the period. But significant capital expenditure in past years allowed the group to reduce capex 49% to R470m from a year ago.

Mark Hodgson, an analyst at Avior Capital Markets, said the result appeared to be better than expected.

Nampak suffered a R681m foreign exchange loss from its Angolan and Nigerian businesses in the year to September 2016, he said. This pushed headline earnings per share down 48% at the time.

“Metals trading profit and margin uplift combined with being able to expatriate some [dollar] cash from Nigeria,” said Hodgson.

Nampak said the asset recapitalisation programme in SA was almost complete and was contributing to improved efficiencies and competitiveness. Group net gearing of 51% remained in the target range and short-term liquidity ratios were strong, it said.

Cash from Nigeria and Angola was being extracted and hedged against. But less than optimal cash extraction and exposure to currency volatility remained risk areas as the positions were not fully hedged.

Nampak did not declare an interim ordinary dividend and was focusing on conserving cash. It said its medium- to longterm outlook was favourable.