JSE-listed packaging multinational Nampak says trading conditions for the five months ended February 28, were robust, with strong demand for the majority of its products, strong volume growth for beverage cans in its key markets and higher pricing having contributed to revenue growth of more than 20% compared with the five months to February 28, 2021.

Further, despite higher input costs owing to significant increases in global commodity prices, trading profits, operating profit and earnings before interest, taxes, depreciation and amortisation increased, with strong growth over the prior comparative period.

The group complied with funding covenants for the quarterly measurement period ended December 31, 2021. Management continues to closely monitor covenants on a monthly basis and access the sustainability of the long-term debt and capital structure.

The company achieved a robust performance in its operations in the rest of Africa, supported by unrestricted trading in South Africa.

The Nampak metals business recorded volume increases in all key markets, with the rest of Africa making the largest contribution to revenue and trading profit growth.

"The South African beverage can market experienced strong growth. To date, Bevcan South Africa experienced market conditions where demand for certain products exceeded its available capacity.

"Higher selling prices, resulting from significant increases in aluminium prices, were a key contributor to revenue growth as these price increases had to be passed on to customers using contractual pass-through pricing mechanisms," Nampak reported in a trading update on March 29.

Further, Bevcan Nigeria continued to perform well and was a major contributor to improved group results for the period.

Bevcan Angola started to experience improved volumes with the easing of pandemic-related trading restrictions, albeit from a very low base.

Additionally, DivFood in South Africa traded strongly in the second quarter to date, with particularly strong fish can sales. The turnaround activities in the division continue and further benefits are expected to be realised during the second half of 2022, Nampak said.

Growth in the plastics division, meanwhile, was driven by the strong performance of the group’s Zimbabwean operations, supported by a solid performance from the liquid cartons business in South Africa. Improved operational efficiencies contributed to higher profitability.

"Plastics South Africa’s performance was reasonable, but lower volumes, owing to an elongated strike at a key customer, impacted profitability negatively.

"Zimbabwean operations performed well and demand remained resilient. Both revenue and trading profit grew in double digits while these operations remained self-funding despite constantly being limited by the lack of foreign exchange availability," the company reported.

Further, overall performance for the paper division was pleasing, largely driven by good performance in Zimbabwe and higher volumes in Zambia and Malawi. Both revenue and trading profit were significantly up, Nampak said.

However, while operational cash generation is strong as a result of healthy trading conditions, there is increased pressure on the utilisation of cash flows to fund working capital, the company said.

"Significantly higher commodity and shipping prices, coupled with global supply chain disruptions, led to a higher than planned investment in working capital to ensure continued supply of raw materials into our operations. The newly added geopolitical risk of the Russian-Ukrainian war has put additional pressure on working capital. Capital expenditure remains well controlled," it said.

The disposal of identified noncore assets continued to be challenging in current market conditions and therefore other asset disposals are being considered, Nampak added.

"Approximately R400-million of a non-recourse trade finance facility of R1-billion has been used to date, with R206-million having been applied to permanently reduce the group’s existing banking facilities. Negotiations with downstream and upstream trading partners in the South African supply chain are yielding results, which will assist to reduce the group’s required investment in net working capital," it said.

In line with existing funding agreements, the group’s ability to reduce its net interest-bearing debt by R1-billion by September 30, 2022, will be assessed by the funders on June 30.

"Cash proceeds from the disposal of assets, internally generated cash, the use of the group’s non-recourse trade finance facility and/or proceeds raised from a capital raise will be considered in determining the group’s ability to repay net interest-bearing debt," the company added.