Forex hit deepens Nampak’s loss
Nampak CEO Phil Roux struck an optimistic tone going into the new financial year even as he warned about sustained low growth in key markets, particularly SA and Nigeria.
The packaging group is optimising its portfolio by cutting costs and potentially letting go of assets that undermine its ability to remain sustainably profitable.
Nampak managed to bring its capital structure under control in the year to September after a rights offer, but higher foreign exchange losses, net impairment losses and finance costs cast a shadow on its financial results, masking the improvement in cash generated from operations before working capital changes.
The company suffered a net loss of R4bn during the reporting period versus the R26m it lost in the same period a year ago.
Forex losses were particularly acute in Nigeria where the naira depreciated sharply against the dollar, resulting in a surge in costs for raw materials funded in the US currency. To help recover costs, Nampak passed on the price increases to customers, but this came at a cost to volumes as customers battled to absorb the increases.
Net interest costs also increased substantially, reflecting the rising interest rate environment and costs associated with the refinancing of the group’s funding package.
“It would be naive to believe that it will be plain sailing. There will be sustained low growth in most geographies we operate in and significant hard currency liquidity constraints. We are somewhat at the behest of our customers. However, we will continue to strengthen our value proposition as the agility increases,” Roux said during the company’s results presentation.
“Our competitors within the beverage category are acutely aware of our supply limitations ... which we will overcome in the new year as we install new capacity. We remain concerned about SA. Corporates are battling to keep pace in the rapidly changing environment. Our most serious risk is volume loss in the short term.”
Nampak listed on the JSE in 1969 and has 19 sites in SA and 11 in the rest of Africa.
SA is its biggest region by revenue, generating 66.8%, and metals the biggest by segment, generating 73.8%, in the latest annual results.
NO DIVIDEND
Revenue fell 1.8% to R16.6bn while its operating loss was R2.6bn, swinging from an operating profit of R640m previously. No dividend was declared. This comes after the group suffered a R1.2bn loss from foreign exchange, with most of it coming from Nigeria. The naira weakened after being floated in June. When a currency is floated, its value is determined by supply and demand without the intervention of a central bank.
“Due to the significant lack of liquidity in the Nigerian currency market, there are no formal hedging opportunities and our treasury function is reliant upon the allocation of dollar liquidity by the Central Bank of Nigeria,” Nampak said.