Nampak to revamp plastics business

Packaging manufacturer Nampak is restructuring its plastics business in SA and Europe amid a fall in profits from the division, management said on Tuesday.

The group announced impairments of R247m attributable to Nampak Plastics Europe after a major customer in the dairy industry decided to start making its own bottles.

Nampak CEO Andre de Ruyter said the European business had been downsized, with Nampak agreeing to sell some of its plants to that customer.

“We’re busy developing other markets to replace the volume that we’ve lost,” he said.

“We are looking at applying the same light-weighting technology that we used so successfully for dairy and selling that same technology to other plastic bottle customers.”

Nampak had also appointed a new MD and chief financial officer in Europe.

WE ARE REDUCING LAYERS OF MANAGEMENT AND WE’RE ALSO CONSOLIDATING OUR PLANT FOOTPRINT

“We’re already seeing the results come through in improved safety performance and efficiencies and we fully expect improved profitability will follow in the next financial year,” said De Ruyter.

In SA, Nampak was stripping costs out of its plastics business.

“We are reducing layers of management and we’re also consolidating our plant footprint,” he said.

In Gauteng, Nampak will operate from its Isando facility and will close its plant in Industria, a move that De Ruyter expected to yield R17m-R18m in savings each year.

In the year through September Africa, excluding SA, contributed towards nearly twothirds of Nampak’s trading profits, which rose 3% to R2bn.

Avior Capital Markets analyst Mark Hodgson said Nampak’s metals division "performed well”, though other divisions were disappointing, particularly the glass business, which also incurred impairments.

“While glass has got earnings recovery potential, they are sending a concerning message writing down the glass goodwill and intangibles.

“The group faces a number of challenges including the continued absence of a dividend despite an improved balance sheet. It’s hard to see investors getting too excited about Nampak in the short term,” Hodgson said.