Maybe time to sell some pack­ages

Will the new boss think out­side the box?

Finweek English Edition - - Companies & Markets -

NAM­PAK’S AGM THIS week should see some prob­ing ques­tions from share­hold­ers. They’ll want an up­date on Nam­pak’s “re­vised strate­gic plan” – chiefly to achieve an­nual growth in trad­ing in­come ahead of the rate of inflation in South Africa and to reach a re­turn on net as­sets of 20% within the next three years.

It’s ac­tu­ally a shorter time­frame now, a lit­tle over twoand-a-half years. And out­go­ing CEO John Bor­tolan ad­mits it’s an “am­bi­tious plan”. He ear­lier told Fin­week, af­ter Nam­pak broke with tra­di­tion and cut its div­i­dend, that the group had planned cap­i­tal spending projects of more than R2bn and would be looking for “growth op­por­tu­ni­ties”.

How­ever, the em­pha­sis might have changed slightly. An­a­lysts and fund man­agers say Nam­pak may have to prune its ex­ten­sive op­er­a­tions for the sake of prof­itabil­ity (see and that get­ting costs out of the sys­tem should be the pri­or­ity.

Nam­pak is a large and sprawl­ing or­gan­i­sa­tion. As Africa’s largest packaging group it has 65 op­er­a­tions in SA, 24 in other African coun­tries and 23 op­er­a­tions in Europe, which is where it may have to look hard­est at costs and pos­si­bly con­sider sell­ing some as­sets.

The re­vised plan is de­mand­ing, be­cause in its last fi­nan­cial re­sults, trad­ing in­come was de­clin­ing in all the ma­jor re­gions Nam­pak op­er­ates in and re­turn on net as­sets was only 10%. But Bor­tolan says its goals could be achieved be­cause two of the main in­dus­tries Nam­pak sup­plies packaging to are food and bev­er­ages.

Those are de­fen­sive in­dus­tries, but the ef­fect on con­sumers of the global eco­nomic slow­down could be­come worse and spending will be cut wher­ever pos­si­ble. For ex­am­ple, the lat­est quar­terly trad­ing up­date from SABMiller (one of Nam­pak’s largest clients) showed a sharp slow­down, and in some cases a de­cline, in lager vol­umes. Re­ports from Bri­tain last week said beer sales were down.

Nam­pak has al­ready faced ques­tions from two of its large in­sti­tu­tional share­hold­ers: the Pub­lic In­vest­ment Cor­po­ra­tion (PIC) and Frater As­set Man­age­ment. Oa­sis As­set Man­age­ment is also a share­holder and doesn’t usu­ally keep quiet about much.

All that might save Nam­pak’s man­age­ment from a roast­ing on Wed­nes­day is the ar­rival of new CEO An­drew Mar­shall, who takes over the reins on 1 March. He has headed Oceana for the past 10 years and joins Nam­pak at a chal­leng­ing time.

De­spite the div­i­dend cut, Nam­pak still of­fers a healthy div­i­dend yield of 7,7%. That ap­peals to value in­vestors. But the ap­par­ent value in this large group is still to come through: some in­vest­ment pro­fes­sion­als have been call­ing it a value play for the past three years – and are still wait­ing.

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