Liquidity problems continue in both countries
DIVERSIFIED packaging manufacturer Nampak said yesterday it was still battling to get money out of Nigeria and Angola as it expected the currency volatility and liquidity problems in the two countries to continue.
Nampak warned that liquidity “issues” and possible currency devaluations in Nigeria and Angola might result in potential foreign currency conversion impacts in the current financial year.
The group said “slower than optimal” cash extraction from the two countries and exposure to currency volatility of cash held affected the company’s overall performance.
It said the currency volatility and liquidity constraints were expected to remain in the short to medium-term “and alternative hedging instruments are being considered to mitigate the foreign exchange risks”.
“Regulated repayments include capital loans, interest on loans remittance and dividend extractions. While we have taken all possible steps to extract cash from these markets, we cannot rule out further impacts resulting from exchange rate fluctuations.”
Nampak has previously said that it had tried to convert naira into dollars “with moderate success” as the oil-dependent economies battled with a sharp fall in export earnings, as well as a shortage of dollars.
It previously said it is the market leader in manufacturing beverage cans in South Africa, Nigeria and Angola. It is the sole producer of cigarette cartons in Nigeria.
In the 2016 financial year, dollar illiquidity in Nigeria and Angola resulted in a R681 million foreign exchange loss.
But in an update for the period October 1 last year to February 28 this year, Nampak said that since September 30, 2016, there had been no devaluation in the Nigerian naira and Angolan kwanza official exchange rates.
As a result, foreign currency translation did not materially affect Nampak’s performance for the five months ended February 28.
It said the slowdown in consumer spending in South Africa affected spending on goods and services. An improving inflation outlook, a stronger rand, improving commodity prices and a narrowing in the current account deficit were expected to support a modestly higher growth rate this year.
The group said it would consider the “appropriateness” of paying a dividend this year.
Meanwhile, Nampak said it was cautious about capital investment, given what it called prevailing macro-economic conditions in key markets.
“Capital expenditure for the full year is expected at between R800 million to R1 billion, with some 60 percent being replacement or sustenance capital, and the balance being expansion capital.
“Maintenance expenditure is not compromised by cutbacks on capital expenditure,” Nampak said.
Nampak shares on the JSE yesterday closed 0.61 percent higher at R16.47 a share.