Africa’s biggest packaging group, Nampak, is looking to shift towards sustainable and recyclable aluminium for its client’s water products, becoming the latest company to tweak its business model in response to investor and consumer pressure for bio-friendly commercial practices.
Specialising in the manufacturing and design of packaging used for energy drinks and food, the manufacturer says it sees great cost savings and environmentally friendly opportunities in aluminium encasing for products such as water and cereals.
Aluminium “is super-efficient as a substrate for recycling hence the reason why we are trying to push more of our business into sustainable aluminium packaging, simply because the recycling footprint is less”, CEO Erik Smuts told Business Day.
“Aluminium is absolutely infinitely recyclable and you only require 5% of the energy that is required the first time around … We see it as a huge opportunity,” he added.
Even as the company outlines plans to move to environmentally friendly materials, the manufacturer has been battling to cut its R4.7bn net debt pile while avoiding forced asset sales and tapping shareholders for cash injection.
Over the last two years, Nampak has introduced aluminium cans for water bottling and packaging, but the uptake has been slow locally. It is joining a host of companies from banks to retailers rethinking how they do business amid pressure from regulators, investors and customers to demonstrate their commitment to help fight climate change.
“In South Africa the trend is not that strong yet, whereas in Europe and North America it’s extremely strong,” said Smuts, adding that the potential for a swing in the same direction was palpable in SA, which is a signatory of the Paris agreement that targets cutting greenhouse gas emissions.
The UK government has been pushing to phase out single-use plastics, including extruded polystyrene cups and food and beverage containers, while the momentum towards environmentally conscious laws in SA is gaining traction.
Nampak has three divisions, namely metals (its largest operation), plastic and paper. Though a move away from plastic water bottling would impede on its plastics division, Smuts is confident the gains made in its metals division would be material. “Though we will lose on the one side, we will gain a lot more on the metals side.”
Following a slump in profitability, the group returned to profit in its 2021 year after strong export sales and surprising growth in Nigeria.
Smuts admits that the manufacturer is not out of the woods yet but he is enthusiastic about the recovery effort at Nampak, which has a market capitalisation of more than R2.4bn.
Revenue rose 24% to R14bn in Nampak’s 2021 year to end-September, mainly because of a good performance by its metals division, which makes up over 70% of group revenue and more than three-quarters of trading profit.
“Where we were probably considered forced sellers a year ago, our profitability is looking a lot better, so we are definitely not forced sellers any more,” he added.
For Nampak, the financial year ahead will still be focused on bringing down debt, consolidating its local footprint and making sure it runs as a sustainable business while exploring options for the uses of aluminium to package foods and beverages.
In afternoon trade on Wednesday, Nampak’s shares were up 5.5% to R3.82, having climbed 81% in the year to date.
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