Nampak reports volume reduction across sectors
PACKAGING group, Nampak Zimbabwe Limited has bemoaned obtaining foreign currency shortages as one of the major challenges that had a knock-on effect on the business for the third quarter and nine months to June 30, 2020.
“The shortage of sufficient foreign currency for importing raw materials remained the group’s main concern, especially in respect of paper for conversion into corrugated boxes for the commercial and tobacco sectors,” said Nampak in a trading update for the quarter and nine months under review.
Volume reduction continued across all sectors of the business and margins were squeezed due to competition in the market. However, demand remained positive across most product portfolios and all units traded profitably.
At Hunyani Paper and Packaging, volumes went down 36 percent for the quarter and 31 percent for the nine months compared to prior year periods. The export market declined 56 percent, still largely due to competition in the regional tobacco case market.
According to the group, volumes in the commercial segment were 13 percent below the prior-year nine-month period, affected in the third quarter by depressed demand due to the Covid-19 lockdown restrictions.
Volumes at Mega Pak declined by 12 percent in the quarter and by 25 percent for the nine months, mainly due to continuing contraction in consumer demand in the beverage sector.
“There was a partial recovery in the third quarter due to higher volumes for preforms and closures driven by indirect exports. Raw material sourcing remained of concern,” said Nampak.
On the downside, volumes at CarnaudMetalbox, slowed 48 percent and by 36 percent respectively, for the quarter and the nine months of the financial year compared to the corresponding periods in the previous financial year.
HDPE sales volumes continue to be affected by the decline in the scud and mahewu container off-take while the metals volumes are being impacted negatively by the shortage of tinplate.
Despite the economic uncertainties caused by the Covid-19 pandemic on business operations, management at Nampak remains upbeat of business sustainability. The pandemic has posed challenges across sectors of the economy and its full impact is yet to be ascertained.
Said Nampak: “The negative impact of restricted travelling both internally and externally, closed businesses and reduced consumer demand, where incomes do not keep pace with inflation, are problems to which the business will have to adjust.
“The unstable macro-economic difficulties are unlikely to be overcome in the short to medium term; however, the group remains confident of continuing sustainability.”
Meanwhile Nampak’s revenue for the third quarter and nine months to June 30, 2020 rose 522 percent and 644 percent respectively ahead of the same period in the prior year in historical terms.
According to the group, the business adjusted prices in line with economic trends characterised by inflationary pressures, foreign currency shortages, and low disposable incomes.