Nampak’s ‘Africa Rising’ narrative failed to take off in key markets, chair says

Outgoing Nampak chair Peter Surgey has reflected on the disastrous expansion into the rest of Africa, which backfired and hurt shareholder value, with the company having not paid dividends since 2016.

In his letter to shareholders published in the group’s annual report, Surgey said 2023 was one of fundamental changes in trying to reduce its high debt levels, win back shareholder confidence and fix organisational structure that was no longer fit for purpose.

“What has been disappointing is that the “Africa Rising“ narrative, which we had followed with large investments in Nigeria and Angola, failed to take off. The investments initially went well with excellent facilities constructed,” he said.

“Sadly, the forecast acceleration in economic growth did not materialise and the economies of both countries declined steadily. These declines were compounded by Zimbabwe, where Nampak has an excellent business but has been unable to externalise any dividends for years.”

The company started its first operation outside SA in Nigeria in 2007 under former CEO John Bortolan.

His successor, Andrew Marshall, invested R600m in a new plant in Angola and bought Alucan Packaging for $301m to establish Bevcan Nigeria in 2013.

The group recently reported a R4bn loss for the year to end-September, a mammoth jump from the R26m it lost in the same period a year ago. The steep loss was a result of higher foreign-exchange losses, net impairment losses and finance costs.

Forex losses were particularly acute in Nigeria where the naira depreciated sharply against the dollar, resulting in a surge in costs for raw materials funded in the US currency.

Higher interest rates pushed up Nampak’s cost of borrowing, with the net financing costs surging 108.7% to R1.2bn. The recent rights issue, to the tune of R1bn, was concluded to address the group’s debt pile after an ill-fated expansion into the rest of Africa.

Surgey, who has been on the board since 2009, said the re-negotiation of the debt package was an “epic” undertaking.

“During this time, 13 board meetings were held, five of which were special meetings … I had previously agreed to stay on the board while the refinancing and rights offer were being undertaken. Now that these have been successfully completed, I will be retiring from the board at the next AGM. It has been quite a ride.”

Nampak has merged two divisions — BevCan and DivFood — as it works to simplify its structure and draw on efficiencies to turn around the company’s fortunes.

Nampak, which has been listed on the JSE for 54 years, is the largest manufacturer of beverage cans in SA and the only producer of the product in Angola. The company also has a sizable presence in the metal and plastic packaging in SA.

CEO Phil Roux said in the report that the big inhibitors to Nampak in the year under review have been the dysfunctional currency markets in Angola, Nigeria and Zimbabwe which resulted in forex losses.

Roux, who was appointed to the role in 2023, said Nampak was too important to fail.

“Nampak cannot, and will not, fail. We will prevail. We have overcome what some thought was insurmountable. We will continue to bring emotional and intellectual energy to work every day,” Roux said.

“We will execute with as much urgency and precision as possible. Our customers must want to do business with Nampak and we must be regarded as the most formidable and trustworthy partner, enabled by unconditional integrity in all we do. It is clear we have our work cut out for us, but I have a conviction that this is achievable.”

With Nico Gous and Michelle Gumede

khumalok@businesslive.co.za