Shares in Nampak surged 8.14% on Friday after the group returned to profitability in the six months to end-March, showing that its extensive restructuring and asset disposal programme is paying off.
In 2023, the JSE-listed packaging manufacturer implemented a comprehensive turnaround plan, which included board and management changes; a business model review; a capital and debt restructuring programme; a rights offer; and the adoption of a new strategy focused on its core metals business.
On Friday, the group reported revenue from continuing operations rose 7% to R6.2bn, reflecting encouraging growth despite an operating environment that was characterised by high interest rates, inflation and the resultant pressure on consumers’ disposable income.
A headline profit of R447m and headline earnings per share (HEPS) of 5,393.9c was reported compared with a R327m headline loss and headline loss per share of 11 027.3c in the previous year.
CEO Phil Roux said the most salient performance drivers were a step change in the performance of the continuing metals business, a cost reduction programme, lower impairment losses, improved working capital management and progress on asset disposals.
“We have achieved positive results in our transformation journey over the past 12 months,” Roux said. “SA Metals performed exceptionally well due to the turnaround initiatives gaining momentum.”
The Metals SA business improved its profitability with the operating margin expanding from 5.2% to 12.3% due to the numerous turnaround initiatives coming to fruition, it said, adding that this margin was deemed to be sustainable given growth and further efficiency opportunities.
It said the beverage category had shown resilience with satisfactory growth in beer and sustained energy drink volumes.
The improvements come despite consumers being badly affected by rising costs due to inflationary pressure, high interest rates and increased fuel costs.
Nampak flagged various issues that affected performance during the six months, including unreliable municipal infrastructure, resulting in electricity failures at the Springs plant, partial volume loss with two major customers and an invasive cyber incident that was remedied.
Nampak delayed the release of its interim results by a month after a cyber incident in March that affected its IT systems.
Cash generated from operations before working capital changes jumped 53% to R878m. The Johannesburg-based group reported a free cash flow of R810m compared with a cash outflow of R109m in 2023.
The company concluded refinancing agreements in September and as part of that deal, Nampak was required to settle R2.7bn by end-March 2026 with repayments of R243m due in March with R477m required to be paid in September.
CFO Glen Fullerton said the March debt had been settled in full and the group was well positioned to make the September payment and any other covenants given the strong cash generation and momentum on asset disposals.
“There’s renewed confidence given the turnaround,” Fullerton said. “I think the business is in far better shape than it has been in some time.”
Nampak’s divestiture initiatives have yielded disposals of R2.1bn across the business portfolio and are tracking ahead of the internally set time frames. Proceeds from all disposals will be used to further repay debt and reduce gearing.
Roux said the business was better positioned to compete effectively and unlock further value as it re-engineered the diversified portfolio, installed new capacity in Bevcan SA, and reduced costs while paying down debt.
“The momentum behind the asset disposal plan gives further credence to the turnaround,” the CEO said.
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