Zam-Buk helps rank-and-file keep heart and soul together
The drive to Nampak’s factory in Vanderbijlpark takes you through a 1970s-style vision of SA as a young and thrusting industrial pup, feasting on cheap labour, its home-grown enterprises showing two fingers to the moralising curmudgeons up north.
Today the air is still crusty with smog, the roads once you get off the highway are rutted and decrepit, and throngs of unemployed people loiter on the littered verges.
This area remains home to SA’s most stellar industrial achievement, Sasol, though the domestic operation now toils in the service of some spectacular foul-ups overseas. Sasol is probably the one blue chip in the JSE top 40 you’d immediately strike off your list of investment options.
It’s one thing buying at what you reckon is a bottom, quite another buying when you’re standing on the lip of another crumbling cliff.
Just down the street from Nampak’s neat little factory is ArcelorMittal SA, not quite as dark and satanic as it was in John Vorster’s day in its guise as Iscor/Yskor, but still a fairly forbidding presence.
That company is going through horrible cost-cutting and hundreds of people are going to lose their jobs. Something is wrong at the steel producer, but the guys at Nampak are mainly concerned that they cannot depend on its products.
Vanderbijlpark is where you will find DivFood, one wing (the other is beverage cans) of Nampak’s core metals division, where a guided stroll reveals what you would expect: thumping production lines and rooms full of raw rolls of steel.
With Arcelor Mittal next door, one would assume the product gets put on a bakkie and trundled across. No, says our guide lightly, that’s from China. It’s cheaper.
At the moment Nampak is busy flogging its glass division, and everyone knows the problems it has trying to repatriate cash from its enterprises in Angola and Zimbabwe, so canned food produced locally has become a vital part of the packaging firm’s business.
Nampak’s metals division contributes about 60% of the group’s revenue and up to 80% of its trading profit. Leaving beverage cans aside for the moment (the division has its own headaches), DivFood has become the most dependable pillar of the group.
Primarily a food cannery, it
has nice little earners on the side in the form of aerosols, paint, floor polish, motor oil and
… Zam-Buk. Those ubiquitous little green tin tubs have become iconic in this part of the world, consumer spending cycles be damned.
Speaking of consumer spending, the performance of packaging companies gives you a pretty good overview of the general economic environment. Nampak has taken a bit of a clobbering. Headline earnings dropped 9% in the six months to the end of March. No dividend was declared.
Boss Andre de Ruyter said the company had repatriated only R27m from outside SA. This must frustrate the life out of him because Nampak is toddling along bravely at home
thanks in large part to its domestic DivFood operations.
THE PERFORMANCE OF PACKAGING COMPANIES GIVES YOU A PRETTY GOOD OVERVIEW OF THE GENERAL ECONOMIC ENVIRONMENT
One of five DivFood factories, the Vanderbijlpark facility employs 650 people who produce nearly 3-billion units of packaging a year.
Good going, Nampak. And it will get better once the glass division is sold (to an unnamed black-owned entity backed by “a large international corporation with significant glass expertise”) to free up cash flow and cut debt.
The ups and downs of DivFood are one way to gauge how listed consumer goods producers such as Tiger Brands and AVI are doing — and also how consumers are bearing up. Because food packaging makes up 60% of Nampak’s business, it keeps a beady eye on retail consumption trends.
Three years ago DivFood’s operations people noted how consumers were trading down
— seen in spiking demand for cans of baked beans, bully beef and fish. Little has changed.
So, for now, the rank and file of us seem to be keeping body and soul together. With a little pick-me-up from Zam-Buk, of course.