JSE-listed packaging producer Nampak has achieved headline earnings of R267-million for its total operations for the six months ended March 31, compared with a headline loss of R342-million for the comparable six-month period in the 2023 financial year.

Loss from total operations for the period was R93-million, compared with a loss of R2.49-billion in the first half-year period of the 2023 financial year.

Further, Nampak increased revenue from its continuing operations by 7% to R6.2-billion for the interim reporting period, increased trading profit by 133% to R770-million, and increased earnings before interest, taxes, depreciation and amortisation by 201%, to R1.148-billion, during the six months.

The operating profit before net impairments from continuing operations for the six months under review was R1-billion, up from R235-million in the comparable first-half period in the 2023 financial year.

Operating profit from continuing operations for the interim period was R992-million, compared to a loss of R558-million in the first half-year period of the 2023 financial year. Profit from continuing operations was R395-million, compared to a loss of R878-million in the 2023 first half-year period.

Additionally, headline earnings from continuing operations for the interim period were R447-million, compared to a headline loss of R327-million in the first-half year period of the 2023 financial year.

“These results are owing to gargantuan efforts from all at Nampak over the past 15 months,” said Nampak CEO Phil Roux during the company's interim results presentation.

“We have achieved positive results in our transformation journey over the past 12 months. This includes a step-change in the performance of the continuing metals group, a highly effective cost reduction programme, significantly lower impairment losses, improved working capital management and pleasing progress on asset disposals.

“The interim results were pleasing despite significant macro-economic headwinds in most geographies. South Africa Metals performed exceptionally well owing to the turnaround initiatives gaining momentum,” he said.

The core focus areas for the company include portfolio optimisation, spearheaded by divestitures and stock keeping unit rationalisation; and cost reduction and unearthing inefficiencies enabled by a merged South Africa Metals business model.

Additionally, it was focusing on strengthening the Nampak brand proposition; developing a group-wide customer obsession; and building a high-performance learning culture, he said.

The increase in group revenue from continuing operations reflected encouraging growth despite an operating environment that was characterised by high interest rates, inflation and the resultant pressure on consumers’ disposable income, Roux said.

Further, despite declines in revenue in DivFood and Bevcan Angola, Metals recorded a 6% increase in revenue, boosted by growth achieved with Bevcan South Africa. Plastics increased revenue by 9% during the interim period and Paper increased revenue by 10%.

Improved operating margins were achieved through portfolio optimisation and cost-reduction initiatives.

Nampak also reduced net finance costs by 7% to R459-million, down from R491-million in the 2023 interim period, benefiting from the reduction in debt as a result of the net rights issue proceeds of R960-million received in September 2023 and net cash generated during the period under review, said Nampak CFO Glenn Fullerton.

The company repaid R243-million in debt in March, which would benefit the second half of the financial year, and the R477-million due in September would be funded from disposals, he said.

“The beverage category that Nampak serves has shown relative resilience with satisfactory beer and sustained energy drink volume growth. Profitability was bolstered by the can substrate increasing as a format of choice, improved product mix, significant cost reduction and improved plant efficiencies, which resulted in higher margins.

“Net working capital was particularly well managed with positive impacts on improved cash flows,” Fullerton noted.

“The planned capital investment of R350-million bodes well for the future, given the sustained growth of the large pack format that offers a value proposition to consumers. The commissioning of the new Springs Line 2 will provide capacity expansion to address this growing market segment,” said Roux.

“Capex is being tightly controlled and the expansionary capex on the Springs Line 2 is critical for growth in the 500 ml can market. The project capex has been split over two years, and we are expecting it to come in under budget and on time,” Fullerton noted during the results presentation.

Nampak expects future capex requirements to be about R350-million to R400-million a year.

Meanwhile, the company's DivFood reported a marginal revenue decrease owing to portfolio rationalisation and a large customer’s plant closure for maintenance. Disruptions in local ports in the first quarter of the financial year impacted supply to customers.

The food category experienced mixed fortunes with a softening demand for deciduous fruits and vegetable products partially offset by growth in other categories. Monobloc and tinplate aerosol volumes were affected by weak demand.

However, solid progress in the Diversified portfolio was owing to interventions which included revitalised leadership, portfolio rationalisation, cost management and margin expansion, said Roux.

“An operating loss reported in the prior period was converted into a strong operating profit with a turnaround of more than R186-million. Notwithstanding the pleasing results from the turnaround, there is further scope for growth and efficiency improvements,” he said.

“Nampak is not immune to constrained economic conditions in the multiple geographies in which it operates. The business is, however, increasingly better positioned to compete effectively and unlock further value.

“We anticipate improvements and growth within the Diversified portfolio as we re-engineer the business. The new capacity installed within Bevcan South Africa will be fully leveraged. A sustained corporate focus on scaling down and cost reduction remains an ongoing theme,” he noted.

Sustainable earnings will depend on the company's ability to deliver on its objectives of growth, margin expansion and achieving a strong cashflow.

“There is enough runway ahead for growth, future investments and further rationalisation,” said Roux.