Nampak chiefs under cosh to change culture
Somewhere in the past 10 years, packaging group Nampak changed from being a blue chip, proudly South African, best-in-class company, to an entity with limited direction and managers who wouldn’t risk their own money in the hands of the group.
It swung to a loss of about R2.4bn in its six months to endMarch, from a profit of R653.3m previously. Revenue fell 17% to R6.5bn. Much of the decline in profitability came from failed expansions into Africa with Nampak losing money in Zimbabwe, Nigeria and Angola. This is despite those countries not banning alcohol nor going into full economic lockdowns to curb the spread of Covid-19.
Nampak now needs to guarantee its shareholders that it will change its troubled company culture and that executives will show confidence in the company they work for. One way to do this would be for them to buy shares in the group.
Last week at a general meeting, CEO Erik Smuts who was voted on to Nampak’s board, having been in his role since January, admitted that he did not own a material amount of the company’s shares.
Executives own a smidgen of the 645-million ordinary shares in issue with Smuts holding a 0.03% stake.
Nampak which used to dominate beverage can production in SA, has seen 96% of its market capitalisation wiped out in five years. The stock closed at R1.17 on Tuesday, down 83% year to date. At the end of 2014, it was trading at R41.13.
This is not sustainable and has placed the firm in financial distress. Management now needs to show that it takes Nampak and its shareholders seriously and make wholesale changes otherwise Smuts’s tenure will end in failure.
ESKOM’S COURT VICTORY
Ahigh court victory for Eskom means the utility will be allowed to recover an extra R69bn from consumers over the next three years. That’s over and above the tariff increases that would have been granted anyway. The National Energy Regulator of SA (Nersa) says it will lodge an appeal against the ruling, and has until later in August to do so.
When judgment was handed down at the end of July, Eskom welcomed the ruling that would help to reduce its reliance on government bailouts to survive.
The utility, however, said certain vulnerable sectors of the economy would require special consideration. That includes poor residential customers and is presumably over and above measures already in place to protect the poor, such as free basic electricity of 50kWh per household per month.
Special consideration will also be extended to certain industrial sectors, and Eskom has been participating in proposals in which vulnerable economic sectors would be considered for targeted support. That would seem to include ferrochrome smelters, which have been struggling to compete with countries with cheap power such as Malaysia, and could arguably apply to virtually all industrial power users in SA.
That leaves the residential sector and the rest of SA business from which Eskom will recover R69bn.
The only silver lining perhaps is that these are the Eskom customers that can more easily, and will more likely, defect from the national grid when alternative sources of energy become cheaper than Eskom power.