Deadly pandemic pulls back Nampak
ZIMBABWE’S biggest packaging materials producer, Nampak Zimbabwe said on Wednesday sales volumes declined by 24,7% during the year ended September 30, 2020 due to depressed demand.
In a trading update, the Zimbabwe Stock Exchange-listed outfit blamed the COVID-19-induced lockdown for the slide and pointed out that foreign currency shortage, high inflation and low disposable incomes were among key drawbacks.
Nampak said of the hurdles, foreign exchange shortage remained the biggest problem.
The firm imports paper for conversion into corrugated boxes required for packaging in a cross-section of industries.
“Group revenue and trading income results being expressed in Zimbabwe dollars, was significantly up in all three operating units, boosted by inflationary price increases,” Nampak said.
“This was despite lower sales volumes across all sectors of the business,” the company said.
The group’s printing and converting unit, Hunyani Paper and Packaging, saw its sales volumes decline by 28% year-on-year.
It said the decline at Hunyani’s corrugated products division was driven by a drop in tobacco output and the delayed start of this year’s marketing season due to COVID-19 concerns.
The company’s plastics and metals unit, Mega Pak, reported a 12% drop in sales volumes due to constrained consumer demand in the first half of the year.
However, Nampak said local volumes recovered in the last quarter of the year.
On the export front, Mega Pak suffered depressed demand from regional markets for its products, especially in the Democratic Republic of Congo.
At CarnuadMetalbox, sales volumes for the full year also declined by 34% compared to prior year.
The quarter from July 1, 2020 to September 30, 2020 remained largely dominated by the COVID-19 pandemic, Nampak said.
It said lockdown measures continued to affect the group’s operations due to transportation difficulties and a decline in employee morale.
The firm said it remained profitable as it was spared from shutting down operations during the COVID-19 pandemic lockdown.
Nampak’s units were among a few firms that were classified as essential for the economy.
Although foreign exchange shortages were alleviated by the introduction of the foreign exchange auction system, the insufficient funds were to meet the cost of imported raw material to facilitate efficient production schedules, the company said.
“The decline in regional exports was due to aggressive trading practices emanating from the European Union. The cartons, labels and sacks division remained profitable despite stiffer competition and volume losses,” Nampak said.
“The shortage of foreign exchange and reduced disposable incomes in the first half of the year impacted demand. There was increased product demand in the fourth quarter, as access to foreign exchange improved through the foreign exchange auction system.”
With some foreign exchange now becoming available through the auction system, where about US$400 million has been traded so far, Nampak said it was hopeful that prioritised capital projects could be pursued going forward.
During the reporting period, capital expenditure programmes at Nampak focused mainly on projects started in the previous year.
The group said owing to the additional accounting work necessary for regulatory compliance, including the requirement for both historical and inflation-adjusted figures, there could be a delay in publishing the company’s financial year end results.