Nampak proposes glass unit sale to address ‘skills gap’

AFRICA’s largest packaging firm Nampak Limited has proposed selling its glass division, and says it is facing an unnamed new entrant in the South African beverage can market.

The packaging group’s share price fell as much as 4.6 percent to R16.07 after it issued a trading update last week. Nampak, which has footprint in Zimbabwe and the wider region, did not provide guidance on the change in interim earnings it expects to report on May 30 for the six months to end-March. It is inviting other packaging groups to bid for its glass division, “to ensure the long term profitability of glass and to address the operational skills gap”, the trading update said.

Nampak said its glass division had managed to overcome the severe obstacle of “very inconsistent” electricity supply by installing backup power, but was expected to contribute a loss to its interim results. The glass division’s problems included “insufficient technical skills”, the statement said. Its metals division is bracing itself for the arrival of a new competitor.

“Discussions with a major customer regarding the renewal of an existing supply agreement that comes to an end on March 31 are in progress and we expect that some volume will be allocated to the new entrant,” Nampak said.

Among JSE-listed companies, Nampak has been one of the most aggressive to expand into Africa outside of SA.

“The strengthening of the rand will adversely impact the translation of foreign earnings for all rest of Africa territories, but will benefit the translation of the group’s dollar-denominated borrowings,” it said.

The trading update included a breakdown of the cash balances Nampak holds in various countries along with an indication on whether the money could be brought back to South Africa.

“There are currently no further constraints to extracting cash from Nigeria,” the statement said.

Cash balances in Nigeria fell to R586m as at the end of February from R828m at its September financial year-end, with R567m “successfully extracted” during the five months to endFebruary.

Its Angolan cash balance grew from R2.2bn at end-September to R2.6bn at end-February “as a result of continuing strong can demand in Angola and a continued in-country shortage of US dollars”. Its Zimbabwean cash balance grew from R654m to R841m.

“Following intensive engagements with customers and the Zimbabwe Central Bank, Nampak expects to be allocated foreign currency on a monthly basis beginning in the second half of the 2018 financial year,” it said in its trading update. — Business Day