Nampak CEO Erik Smuts, whose role was curtailed in recent months, has resigned three years after he took the helm of the debt-ridden group. The company announced Smut’s departure on Thursday. He leaves the role with immediate effect.
His resignation comes just two weeks after the appointment of Michael Dorn as chief restructuring officer to oversee a keenly anticipated plan that has finally been submitted to lenders for consideration.
Dorn reports directly to chairperson Peter Surgey, a move that insiders worried would make the CEO role redundant.
The company said a restructuring process, including both the imminent disposal of noncore assets and divestitures from unprofitable operations, had led to material changes to the size and nature of the CEO’s role, resulting in the incumbent opting to step down.
“The board would like to thank Mr Smuts for his loyal service in excess of 25 years to Nampak and especially for leading the company through the Covid-19 pandemic and for laying a strong foundation for the delivery of the turnaround initiatives,” the Nampak board said.
Smuts had been with Nampak for 22 years before he was appointed CEO in January 2020. He immediately faced a tight balancing act between navigating operations in the rest of Africa and maintaining working capital at reasonable levels while meeting debt covenant requirements.
At his debut results presentation, Nampak reported it had swung to a half-year loss of R2.4bn in its six months to end-March, from a profit of R653.3m previously as revenue plunged and it impaired its Angola and Nigeria assets by R3bn, which was four times its market value.
One of Smut’s first acts was to put the brakes on Nampak’s bid to accelerate growth into the rest of Africa. This was as the group was finding it difficult to get cash out of a number of African markets and into SA. However, apart from announcing the completion of suspensive conditions on a 2019 deal to sell Nampak’s Nigerian paper packaging unit as part of a plan to shrink its portfolio and boost returns, and the R40m sale of its crate-making and ancillary plant equipment to Mpact, not many disposals were completed during Smut’s tenure to reduce its R5bn debt pile.
Smuts has also been at pains to push through a rights offer that was approved in September 2022 as a part of a turnaround plan. Debt-laden Nampak in December proposed an “up to” R2bn rights offer to settle at least R1.35bn in debt owed to banks and to fund an upgrade of one of its beverage lines, which saw its share price nosedive.
Resistance from activist shareholders who argued that the proposed rights offer sum was too big and would dilute share values markedly if executed at the prevailing share price, forced Nampak to adjourn its extraordinary general meeting.
Since then, the group has appointed three directors, Tjaart Kruger, Phildon Roux and André van der Veen, to its board to help navigate the debt-laden firm out of troubled financial waters. The move was hailed as a victory for shareholder activism.
Van der Veen, who is renowned for his turnaround expertise, is also a partner at Nampak’s outspoken shareholder, A2 Investment Partners. Roux will take over as acting CEO until the group finds a permanent candidate for the position.
Chief investment officer of Opportune Investments and longtime Nampak critic Chris Logan said Nampak has had a bad policies and a subpar board for at least a decade and the people appointed have not been up to the job. He said “without a doubt” Roux was the “ideal guy” to affect a turnaround at such a difficult company, adding he has the experience and energy for the task.
“I couldn’t think of a better person. The problem is Nampak is one minute to midnight; it’s in a really bad way and the geographies it operates in are extremely challenging.
“The new guys are highly qualified and I don’t think you could find a better three-man team to come on the board, so that’s going to increase the chances of a turnaround massively. The problem is this is a very, very difficult company to turnaround, the challenges at Nampak are profound.”
Logan said shareholders were more likely to buy into the idea of a capital raise “because you’ve now got a recognised turnaround guy and you need a fresh set of hands there in this company that has been on the wrong path for a long time”.
“So, it’s the right thing to do to appoint Roux,” he said. “When they come with their plan, right from the outset it will add more credibility to this attempt to turn around Nampak and refinance it.”
The board said it had initiated a process to appoint a new CEO and supported Roux as interim CEO until such time as a permanent CEO was appointed.
Nampak shares were unmoved at R0.94 on Thursday, after having slumped over 40% over the past three years of trade.
Update: April 20 2023
This article has been updated with new information and comment.
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