Covid-19 consumes Nampak
. . . management in talks with Govt to claim back farms
LISTED paper and packaging group, Nampak, took a significant hit in volumes during the year to September 30, 2020 as demand for all its key products slowed due to the impact of the Covid-19 pandemic.
With the health pandemic not only slowing overall economic activity in the country, but also internationally, firms such as Nampak saw a reduction in purchases of their products, which in turn had a drag on overall company performances.
This has seen some companies in the same sector recording depressed performance and in the process affecting value chains.
“The overall demand for packaging remained subdued this year, compared to previous years,” explained group managing director John Van Gend in a statement accompanying the results.
“Nampak has not been immune to the social and economic impact of the Covid19 pandemic and the resulting effects on the Zimbabwe economy over the past year.”
The group’s linchpin entity — Hunyani — recorded a significant 28 percent decline in volumes over the period under review.
Management largely attributed the weakening performance in this segment to lower tobacco sales and exports last year.
“The Hunyani Corrugated Division decline was driven by the tobacco case market where the local tobacco crop output was significantly down on the prior year and the delayed start of this year’s tobacco marketing season due to Covid-19 concerns,” said Van Gend.
“There was also a decline in regional exports. The cartons, labels and sacks division remained profitable despite stiff competition and reduced volumes.”
Mega Pak’s full year volumes narrowed by 12 percent against the prior year, attributable to constrained consumer demand in the preforms market in the first half of the year.
But local demand increased in the final quarter of the year, reported management.
On the other hand, however, regional export demand was depressed, especially in the Democratic Republic of Congo for Mega Pak products. CarnaudMetalbox recorded the biggest decline in volumes for the period under review, going down a hefty 34 percent compared to the prior year.
Explained management: “The shortage of foreign exchange and reduced disposable incomes in the first half of the year negatively impacted demand.
“There was improved product demand in the final quarter, and access to needed foreign exchange improved through the auction system.” But on a more positive note, the group’s Softex Tissue Products continued to trade profitability as a result of “tight cost control and an improved product mix.”
Meanwhile, the group says it remains in discussions with the Government over getting back control of its Estates. “We maintained our engagement with the relevant Authorities to regain effective control of our Estates in terms of the BIPPA agreement with South Africa.
“Our intention is to rehabilitate them for timber and agricultural purposes, in support of the current Government policy thrust in this direction.
“We remain hopeful for the restoration of title or long term leases which will provide the security required for new investment and job creation,” said the group managing director.
Going forward, Nampak says it is pinning hope on internal strategies such as ongoing cost controlling measures, while also anticipating that the authorities will make progress on current efforts at improving the local doing business climate. “Given the continual focus on cost control and margin preservation, that the group is well positioned to prosper in the coming year.
“Nampak looks forward to continuing co-operation with the Government and all stakeholders towards achieving further muchneeded reforms in Zimbabwe’s macro-economic environment,” said Van Gend.
The board has decided against a dividend for the year just ended, on the basis that available cash resources are “expected to fund future capital expenditure projects and meet working capital requirements.”