Nampak earnings before interest, tax, depreciation and amortisation (Ebitda) increased to R1.5 billion for the year ended 30 September, which is an increase of R1.1bn from R343 million a year before, after benefiting from the turnaround plan.
The profit from continuing operations for the year came to R626m, up from a loss of R2.22bn the previous year.
“The success of the turnaround strategy to date is evidenced by the strong financial recovery, including effective revenue growth management, cost and inefficiency extraction, profitability and positive cash flow,” its directors said yesterday.
Opportune Investments chief investment officer, Chris Logan, said the market appeared happy with the operating results, the executive team, and the turnaround process so far.
“But they want the Nigeria deal to be finalised and the funds to be seen to be flowing back to South Africa,” Logan said.
Favourable investor sentiment surrounding the company was also reflected in the share price, which - although it traded 0.3% lower at R434.95 yesterday afternoon - was still a staggering 163% higher over 12 months.
Nampak’s directors said turnaround process had been augmented by refinancing, numerous divestitures of non-core assets and a new business model.
They said, however, they continued to operate in a highly volatile environment, with slower-than-normal customer growth. Economic growth was pedestrian, inflation high, currencies volatile, and consequently, consumer spending was slower than optimal.
Consumer spending had remained muted in the second half. While food and beverage categories were largely defensive in nature, they were not immune to inflation pressures and high interest rates, which typically manifest in reduced consumption. This was evident in all geographies in which Nampak operates.
They said the company was well positioned for category and share growth given available and newly installed capacity.
Group revenue from continuing operations of R10bn increased by 1%. Increases in Beverage South Africa and Beverage Angola were partially offset by a decline in Diversified South Africa, due to category contraction, slower customer growth, and partial volume loss.
The Beverage category grew, in particular beverage in cans - these were a format that was growing in terms of consumer preference.
But this demand could not be properly tapped due to challenges in the second half relating to the installation of the new 500ml production line at Springs.
Further capex would be invested, including the relocation of a spare line from Angola to South Africa.
Diversified South Africa sustained the exceptional turnaround of the first six months, generating an operating profit compared to a loss in the prior year, despite volume declines due to slower customer demand, loss of business, an extended plant shutdown by a key customer, and supply chain disruptions.
The Angolan business performed well; costs were well managed, augmented by plant efficiencies. Beverage Angola increased its Ebitda contribution to R276m from R43m.
Package South Africa increased Ebitda by 38% to R806m, complemented by the turnaround in Diversified South Africa, which reported a R325m Ebitda compared to R15m in the prior year.
Trading profit of continuing operations increased by 140% to R1bn, assisted by improvements of 47% in Beverage South Africa, 60% in Beverage Angola, and 937% in Diversified South Africa, partially offset by non-recurring restructuring costs.
Capital and other items of R196m boosted profitability compared to a net negative R360m in 2023. This resulted in a positive swing of R556m. Contributors to this included a R290m post-retirement medical aid gain, a reduction of R137m in forex losses in Angola, and R27m lower retrenchment and restructuring costs.
Asset impairment losses of R471m were reversed. These were due to net impairment reversals of R273m and R234m related to Diversified South Africa and Beverage Angola respectively, reflecting the improved outlook for these operations. This compared to net impairment losses of R1.1bn in the prior year.
Net finance costs decreased by 24% to R926m from R1.2bn.
During the year, the group disposed of Drums and Crates; Plastics South Africa; Malawi and Zambia, and properties in London, Nigeria, and Tanzania. Proceeds went to repay R720m in net interest-bearing debt.
On May 16, 2024, an agreement was reached for the disposal of Bevcan Nigeria, a deal that was still being implemented. Agreements were reached for the disposal of the 51.43% in Nampak Zimbabwe for up to $25m.
The Zimbabwe disposal would reduce debt, risk, and the volatility associated with operating in the Zimbabwe economy.
“The finalisation of these disposals will materially complete the group's asset disposal plan, with transactions amounting to R2.7bn either completed or in advanced stages of completion,” the directors said.
Directors said the outlook was promising. The focus on the turnaround agenda and corporate activity mostly gives way to a deepened focus on the core business, which is well capitalised and poised for growth and sustained earnings, they said.
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