Packaging manufacturer Nampak has allocated further capex to facilitate the relocation of a spare line from Angola to SA, after sorting out the teething problems during the installation of a new 500ml production line in Gauteng that hindered its output.
CEO Phil Roux said the group was entering the second phase of its strategy, centred on growth activities and capitalising on consumer trends.
“If chapter 1 was about restoration and transformation to get the business out of distress, then chapter 2 is really about growth,” Roux said.
Outlining numerous technical and training challenges faced with the installation of new machinery at its Springs plant, Roux said the merging of old and new technology had delayed things further.
“So it’s taken us time to build our volume to the right levels,” he said. “And finally, we are starting to see the line push out the volumes that we anticipated according to our financial forecast. We’ve even had to have our customers on an allocation basis.”
The group spent R222m in the year for the Springs Line 2 expansion, with further cash earmarked for the project. Part of Nampak’s R450m capex for 2025 will be funnelled towards supporting growth, including the R150m relocation of the spare line from Angola, against R1bn for a new line.
Nampak is banking on the growing shift towards canned beverages over glass and cans’ versatile capabilities to clench market share.
Roux said this was particularly true as beer, energy drinks and new categories such as wine and ready-to-drink mixers, among other offerings, were showing positive growth amid lowering interest rates and positive sentiment about the government of national unity.
To fully capitalise on the category development opportunity and consumer demand for the big, 500ml format can, the Line 2 Springs capital extension needed to run at optimal capacity, he said. The additional capacity would provide further impetus to the growth trajectory.
“In SA, you need only speak to the likes of Switch, the energy drink, or to AB InBev, or Chill Beverages, and players like Heineken ... There’s a big shove on cans and with 500ml it portends value per millilitre, so it’s a good value proposition,” Roux told Business Day.
“Cans are also very recyclable. It also allows you to do appealing designs. So you can run promotions, and you can speak up the brand on that type of substrate, something you can’t do on a label. And then you’ve got the wine manufacturers and brands like Brutal Fruit, alongside all these sorts of ready-to drinks, and new trends emerging where people are putting champagne and mixers all into a can, and that’s a very strong trend.”
Over the past 22 months, the implementation of the group’s turnaround plan has 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 Monday, Nampak reported higher earnings for the year to end-September, citing the benefits of its turnaround strategy.
It said the success of the strategy was made clear by its strong financial recovery, including effective revenue growth management, cost and inefficiency extraction, profitability and positive cash flow. This was augmented by the successful refinancing and numerous divestitures of noncore assets in line with its asset disposal plan. The proceeds from these disposals were used to repay R720m in net interest-bearing debt.
Group revenue from continuing operations rose 1% to R9.96bn, supported by increases of 4% and 6% in Beverage SA and Beverage Angola, respectively, partially offset by a 7% fall in revenue in the Diversified SA business. The stronger rand had a negative effect on the translation of Angola’s revenue to rand.
Operating profit came in at R1.72bn after a loss of R1.04bn a year ago, and it reported a profit for the year of R626m from a R2.21bn loss a year ago, supported by improved trading results; the positive contribution from capital and other items; asset impairment reversals; and lower net interest.
Trading profit increased 140% to R1bn, assisted by improvements of 47% in Beverage SA, 60% in Beverage Angola and 937% in Diversified SA, partially offset by nonrecurring restructuring costs.
Headline earnings per share from continuing operations rose to 1,378c from a loss of 46,811.7c before.
Nampak, which recently announced the sale of its 51.43% holding in Nampak Zimbabwe to TSL for $255m, noted that the sale of the Nigerian beverages business was taking longer than expected despite receiving regulatory competition approvals.
However, Roux allayed investor fears, saying there was no need to panic if the deal did not materialise.
Update: December 2 2024
This story has been updated with new information throughout.
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