JSE-listed packaging manufacturer Nampak’s turnaround plan has resulted in its earnings before interest, taxes, depreciation and amortisation (Ebitda) increasing by R1.1-billion from R343-million in the prior financial year to R1.5-billion in the financial year ended September 30.

Nampak has been undertaking ambitious transformation efforts over the past 12 months, including effective revenue growth and cash flow management, as well as cost and inefficiency extraction.

These efforts were augmented by a successful refinancing and numerous disposals of noncore assets.

The group nonetheless continues to operate in a highly volatile environment characterised by slower-than-normal customer growth, low consumer spending, slow economic growth and volatile currencies.

While the food and beverage categories of Nampak’s business are largely defensive in nature, they are not immune to inflationary pressures and high interest rates, which typically manifest in reduced consumption. Nampak experienced this in all the geographies it operates in during the year under review.

Nampak revenue from continuing operations increased by 1% year-on-year to R9.9-billion, while its trading profit grew by more than 100% year-on-year from R438-million to R1.04-billion in the year under review.

The group’s profit for the year ultimately totalled R626-million, compared with a loss of R2.2-billion in the prior financial year.

Earnings per share grew from a loss of R64.41 in the prior year to a positive R7.55 in the reporting year.

The board resolved not to declare an ordinary dividend for the year.

The company reports cash generated from operations before changes in working capital of R1.6-billion increased by 114% from R741-million in the prior year, reflecting the successful operational turnaround.

Additionally, rigorous management of working capital allowed a further release of R175-million in cash following an optimised 2023 net working capital position.

Considering its total operations, Nampak’s loss attributable to owners for the year decreased from R4-billion in the prior year to R373-million in the reporting year, which equates to a loss a share of R45.

The company’s refinancing endeavour resulted in all its debt being converted to long-term rand-denominated debt. Inclusive of lease liabilities, net debt of R5.3-billion in the reporting year decreased by R522-million from R5.9-billion in the prior year.

BEVERAGE PERFORMANCE

Nampak says increased revenue in its Beverage South Africa and Beverage Angola businesses was offset by a decline in revenue from the Diversified South Africa business owing to category contraction, slower customer growth and partial volume loss.

Overall, the beverage category continues to grow, particularly in cans as a preferred packaging option for consumers.

The company faced challenges relating to the installation of its new 500 ml production line in Springs, Gauteng, in the second half of the reporting year. This resulted in Nampak not being able to fully capitalise on increased demand, however, this was a short-term setback which has since been corrected.

Nampak has also, for the most part, remedied challenges in the Diversified South Africa business, including supply chain disruptions and an extended plant shutdown by a key customer.

The Beverage South Africa, Beverage Angola and Diversified South Africa businesses ultimately delivered increases in Ebitda year-on-year of 47% to R806-million, 60% to R276-million and 937% to R325-million, respectively – which were offset by non-recurring restructuring costs.

DISPOSAL PROGRESS

Nampak’s discontinued operations include Beverage Nigeria, Liquid Cartons South Africa, Malawi and Zambia, South Africa Plastics and Tubes businesses, Inspection and Coding Systems, Nampak Ethiopia, Kenya Metals and Nampak Zimbabwe.

The group managed to contain net impairment losses at R683-million in the year under review, compared with net impairment losses of R1.7-billion having been reported in the prior financial year.

The finalisation of more disposals, including Nampak Zambia for $35-million and Inspection and Coding Systems for R142-million, will materially complete Nampak’s asset disposal plan, which amounts to R2.7-billion.

The outlook for Nampak is promising, the company states, with it being well capitalised and well positioned for growth and sustained earnings.

“The balance sheet is in a healthy state and the assets are well capitalised, allowing for free cash flow generation. The disposal proceeds will further assist in the group's deleveraging,” says chairperson Andre van der Veen.

He adds that turnarounds are tough and with Nampak being such a unique organisation, it was no small feat to reach this point.

CEO Phil Roux explains Nampak’s medium-term initiatives include growing its category share and volume share within the existing customer base, further line modifications to meet demand in South Africa, relocating equipment from Kenya and Angola and reducing complexity within its manufacturing facilities.

“Looking ahead, we know what we need to do, we are in a healthy state with sustainable debt levels and sufficient liquidity. Going forward we will focus on internal operations. We have to manufacture well and implement more manufacturing disciplines to stay best in class,” Van der Veen concludes.