Currency moves affect Nampak

DIVERSIFIED packaging manufacturer Nampak said last week that its performance for the five months to February had been impacted by foreign currency movements, with the devaluation of the kwanza in Angola by 27 percent contributing to those currency movements.

Nampak, the leader in the packaging business, has a number of operations outside of South Africa. It operates in 11 African countries, including in the UK and Ireland.

In the trading update it released last week, the group expected its operations to benefit from the improved economies in those countries.

“Since the 2017 year end, there has been no devaluation in the Nigerian naira. In Angola, the kwanza has been devalued through a series of controlled auctions by the Central Bank and has devalued by 27 percent to the end of February,” the group said.

However, it said the strengthening of the rand would adversely impact the translation of foreign earnings for all rest of Africa territories but would benefit the translation of the group’s dollar denominated borrowings.

Overall, the group expected a better trading performance in 2018.

In South Africa renewed and improving consumer confidence as well as expected higher growth rates and a stronger rand are expected to have a positive multiplier effect on packaging demand and drive growth in volume and overall performance for the year.

Despite the positive update its share price traded on the negative territory on the JSE by shedding more than 8 percent on Thursday afternoon to R15.34 a share, which closed the day at R15.20.

The group said the South African gross domestic product (GDP) growth data for 2017 were better than expected and the recent Statistics SA January 2018 manufacturing production results showed an increase on the January 2017 results.

“Bevcan South Africa has experienced pleasing volume growth in excess of GDP growth for the period. Should this trend continue on the back of improved consumer sentiment, additional capacity by a new entrant in the beverage can market is likely to be absorbed in the medium term,” the group said.

Nampak is also in discussions with a major customer regarding the renewal of an existing supply agreement that has come to an end. It said the talks were in progress and they expected that some volume would be allocated to the new entrant.

The group said the Nigerian economy was displaying an improvement, having emerged from a recession during 2017 with the World Bank forecasting GDP growth of 2.5 percent for 2018.

The group expects to release the half-year results on May 30.