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NPK-Nampak- Interim Report and Cash Distribution: six months ended 31 March 2007
Nampak Limited
Registration number: 1968/008070/06
Share code: NPK
ISIN: ZAE000071676
INTERIM REPORT AND CASH DISTRIBUTION FOR THE SIX MONTHS ENDED 31 MARCH 2007
Revenue up 11%
Volume growth in South Africa up 4%
Trading income up 15%
HEPS up 6%
HEPS (before fair value of financial instruments) up 17%
Condensed Group Income statement
Unaudited Audited
6 months
Ended 31 March
year
ended
30 Sept
2007 2006 Change 2006
Notes Rm Rm % Rm
Revenue 4 8 498.4 7 678.8 10.7 15 261.9
Trading income before 2 919.6 798.2 15.2 1 508.6
abnormal items
Abnormal items 3 (138.6) (4.7) 29.3
Profit from operations 781.0 793.5 1 537.9
Finance costs (122.8) (81.3) (185.4)
Finance income 30.8 24.5 62.7
Income from investments 3.5 3.6 4.8
Share of profit/(loss) of 1.1 (1.4) -
associates
Profit before tax 693.6 738.9 1 420.0
Income tax 229.4 257.7 553.7
Profit for the period 464.2 481.2 866.3
Attributable to:
Equity holders of the 462.2 478.3 861.8
company
Minority interest 2.0 2.9 4.5
464.2 481.2 866.3
Basic earnings per share 79.3 82.6 148.6
(cents)
Fully diluted earnings 75.9 80.1 144.1
per share (cents)
Cash distribution per 33.0 30.0 10.0 96.1
share (cents)
Headline earnings per 87.6 82.5 6.2 151.2
ordinary share (cents)
Fully diluted headline 83.7 80.0 146.6
earnings per share
(cents)
Condensed group balance sheet
Unaudited Audited
6 months
ended 31 March
year
ended
30 Sept
2007 2006 2006
Notes Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 5 463.7 4 641.0 5 217.9
and investment property
Goodwill and other intangible 1 094.8 1 029.4 1 093.3
assets
Non-current financial assets 261.1 151.6 302.5
and associates
Deferred tax assets 3.8 0.6 9.6
6 823.4 5 822.6 6 623.3
Current assets
Inventories 2 456.8 1 932.3 2 169.2
Trade and other receivables 3 128.2 2 524.8 3 121.0
Tax assets 57.5 46.6 64.2
Bank balances, deposits and 5 547.7 271.2 414.6
cash
6 190.2 4 774.9 5 769.0
Assets classified as held for 16.5 106.3 43.3
sale
TOTAL ASSETS 13 030.1 10 703.8 12 435.6
EQUITY AND LIABILITIES
Capital and reserves
Capital reserves 724.7 1 222.7 1 076.2
Other reserves 125.7 (359.7) 195.4
Retained earnings 4 753.8 3 909.6 4 291.6
Equity attributable to equity 5 604.2 4 772.6 5 563.2
holders of the company
Minority interest 40.3 33.0 40.7
Total equity 5 644.5 4 805.6 5 603.9
Non-current liabilities
Loans and borrowings 989.5 914.0 1 021.8
Retirement benefit obligation 709.7 531.5 721.9
Other non-current financial 19.6 21.7 18.9
liabilities
Deferred tax liabilities 678.9 641.5 683.4
2 397.7 2 108.7 2 446.0
Current liabilities
Trade, other payables and 2 731.1 2 181.7 3 038.7
provisions
Bank overdrafts and loans 5 1 932.8 1 358.9 978.8
Tax liabilities 324.0 212.6 363.1
4 987.9 3 753.2 4 380.6
Liabilities directly associated - 36.3 5.1
with assets classified as held
for sale
TOTAL EQUITY AND LIABILITIES 13 030.1 10 703.8 12 435.6
Condensed Group cash flow statement
Unaudited Audited
6 months
ended 31 March
year
ended
30 Sept
2007 2006 2006
Notes Rm Rm Rm
Cash operating profit 1 217.1 1 122.7 2 182.8
Working capital changes (805.4) (793.6) (488.0)
Cash generated from operations 411.7 329.1 1 694.8
Net interest paid (92.0) (59.5) (128.5)
Income from investments 3.5 3.6 4.8
Tax paid (246.0) (225.3) (364.2)
Replacement capital expenditure (358.4) (145.8) (299.1)
Cash (utilised in)/retained (281.2) (97.9) 907.8
from operations
Dividends paid - (328.9) (330.6)
Cash distribution paid (385.0) - (174.4)
Net cash (utilised in)/retained (666.2) (426.8) 402.8
from operating activities
Net cash (utilised in)/retained (128.1) 36.0 (151.6)
from investing activities
Net cash (utilised in)/retained (794.3) (390.8) 251.2
before financing activities
Net cash utilised in financing (56.6) (1 054.6) (1 051.0)
activities
Net decrease in cash and cash (850.9) (1 445.4) (799.8)
equivalents
Cash and cash equivalents at 5 (505.1) 364.8 364.8
beginning of period
Translation of cash in foreign (8.6) 11.9 (70.1)
subsidiaries
Cash and cash equivalents at 5 (1 364.6) (1 068.7) (505.1)
end of period
Group statement of recognised income and expense
Unaudited Audited
6 months
ended 31 March
year
ended
30 Sept
2007 2006 2006
Rm Rm Rm
Exchange differences on translation of (58.4) (73.7) 562.0
foreign operations
Net actuarial gains/(losses) from 6.3 - (92.1)
retirement benefit obligation
Hyper-inflation capital adjustment (7.6) 14.8 (2.4)
(Losses)/gains on cash flow hedges (12.4) - 29.5
Net (expense)/income recognised (72.1) (58.9) 497.0
directly in equity
Transfer from profit or loss to equity - (4.5) -
on hedges
Profit for the period 464.2 481.2 866.3
Total recognised income and expense 392.1 417.8 1 363.3
for the period
Attributable to:
Equity holders of the company 392.5 415.8 1 353.5
Minority interest (0.4) 2.0 9.8
392.1 417.8 1 363.3
Notes
Unaudited Audited
6 months
ended 31 March
year
ended
30 Sept
2007 2006 2006
Rm Rm Rm
1. Basis of preparation
The condensed interim consolidated
financial statements have been
prepared in accordance with
International Accounting Standard
(IAS) 34 Interim Financial Reporting.
The accounting policies used are
consistent with those used for the
group`s 2006 annual financial
statements (which were prepared in
accordance with International
Financial Reporting Standards).
2. Included in trading income before
abnormal items are:
Depreciation 311.2 289.5 589.9
Amortisation 33.2 35.4 68.5
3. Abnormal items
Retrenchment and restructuring costs (10.9) (4.4) (3.1)
Net impairment losses on goodwill, - (16.4) (110.6)
plant and equipment
Net profit on disposal of property 1.2 22.2 71.7
Net (loss)/profit on disposal of (0.1) (0.9) 0.7
businesses
Net monetary adjustment - hyper- (2.2) 6.0 3.0
inflation
Financial instruments fair value (66.9) (1.7) 88.6
adjustment
Share based payment expense on BEE (11.0) (9.5) (21.0)
transaction
Europe strategic review costs (48.7) - -
(138.6) (4.7) 29.3
4. Prior year restatement
SAICA Circular 9/2006 - Transactions
giving rise to adjustments to
revenue/purchases issued in May 2006
provides clarity on accounting
treatment for cash discounts,
settlement discounts, rebates and
extended payment terms. The impact on
the group`s income statement has been
a reclassification of rebates and
discounts to revenue. Comparative
figures for March 2006 have been
restated.
Revenue as previously reported 7 844.6
Rebates and discounts 165.8
Revenue as restated 7 678.8
5. Cash and cash equivalents
Bank overdrafts and loans (1 932.8) (1 358.9) (978.8)
Short-term portion of long-term 20.5 19.0 59.9
liabilities
Bank balances, deposits and cash 547.7 271.2 414.6
Cash included in assets held for sale - - (0.8)
(1 364.6) (1 068.7) (505.1)
6. Supplementary information
Capital expenditure 619.3 327.2 689.4
- expansion 260.9 181.4 390.3
- replacement 358.4 145.8 299.1
Capital commitments 1 133.8 221.8 962.1
- contracted 710.6 156.5 337.0
- approved not contracted 423.2 65.3 625.1
Lease commitments 381.8 415.7 414.5
- land and buildings 335.5 323.3 367.4
- other 46.3 92.4 47.1
Contingent liabilities 713.0 758.3 756.9
- customer claims and guarantees 10.3 19.8 10.6
- taxation 702.7 738.5 746.3
7. Tax contingent liabilities
As reported in the Nampak 2006 Annual Report, the South African Revenue Service
("SARS") raised assessments against a number of companies in the group, covering
three broad areas.
The first area of assessment relates to Malbak Limited and a number of its
subsidiary companies, which were acquired by the group in August 2002, in
respect of transactions which took place between 1991 and 2001. SARS recently
notified the group that it has partially allowed two of the objections, for
relatively small amounts, and disallowed another. Notices of appeal have been
lodged against the assessments in respect of which the objections were
disallowed. The group is still awaiting a response from SARS relating to the
other two objections. An initial amount of R50 million was paid to SARS on a
without prejudice basis and a request for a further suspension of payment of the
balance has been lodged with SARS.
In the second area of assessment, SARS is seeking to tax the profits made by
Metal Box Botswana (Proprietary) Limited in the years 1996 to 2001. SARS
partially allowed the objection against the assessment in respect of additional
tax and interest. A notice of appeal was lodged and the matter has been referred
to Alternative Dispute Resolution.
In the third area of assessment, SARS is seeking to tax the portion of the
insurance proceeds arising from the fire at the glass furnace in 2004. The group
is confident that it can successfully defend this assessment. An objection will
be lodged once reasons for the assessments have been received from SARS.
The tax contingent liabilities include R229.8 million for tax (reduced from
R243.8 million), R127.6 million for penalties (reduced from R128.7 million) and
R345.3 million for interest (reduced from R373.8 million).
Unaudited Audited
6 months
ended 31 March
year
year
ended
30 Sept
2007 2006 Change 2006
Rm Rm % Rm
8. Share statistics
Ordinary shares in issue (000) 655 179 652 577 653 726
Ordinary shares in issue - net 582 688 580 080 581 235
of treasury shares (000)
Weighted average number of 582 745 579 126 579 968
ordinary shares on which
headline earnings and basic
earnings per share are based
(000)
Weighted average number of
ordinary shares on which
diluted headline earnings and
diluted basic earnings per
share are based (000)
624 702 611 082 615 117
9. Determination of headline
earnings
Profit attributable to equity
holders of the company
for the period 462.2 478.3 861.8
Less: preference dividend - - (0.1)
Basic earnings 462.2 478.3 (3.4) 861.7
Adjusted for:
Impairment losses on goodwill, - 18.2 112.6
plant and equipment
Reversal of impairment losses - (1.8) (2.0)
on plant and equipment
Net loss/(profit) on disposal 0.1 0.9 (0.7)
of businesses
Net profit on disposal of (0.7) (26.0) (75.0)
property, plant and equipment
Europe strategic review costs 48.7 - -
Tax effects 0.2 8.1 (19.6)
Headline earnings for the 510.5 477.7 6.9 877.0
period
10. Additional disclosures
Net gearing 42% 42% 28%
Interest cover 8 times 14 times 13 times
Total liabilities:equity 131% 122% 122%
Return on equity 16% 20% 15%
Return on net assets 16% 19% 17%
Net worth per ordinary share 969 828 964
(cents)*
Tangible net worth per ordinary 781 651 776
share (cents)*
*calculated on ordinary shares in issue - net of treasury shares
Comments
CORPORATE ACTIVITY
The Flexpak business at Bellville in the Western Cape was sold to Transpaco for
R28.5 million, plus the value of stock, effective 4 December 2006.
The group exercised its call option to acquire for R24.8 million the remaining
50% of the shares in Burcap Plastics (Pty) Limited. Following approval by the
Competition Tribunal this transaction was effective on 26 March 2007.
Nampak Products Limited sold 25.1% of its shareholding in Interpak Books (Pty)
Limited to a black empowerment company on 2 April 2007 for R16.3 million.
The group undertook a strategic review of its businesses in the United Kingdom
and Europe and this is covered more fully below under the heading "Europe
Strategic Review".
GROUP FINANCIAL REVIEW
Revenue Trading income
2007 2006 2007 2006
Rm Rm Rm Rm
South Africa 5 699 5 357 688 616
Rest of Africa 519 473 84 56
Europe 2 469 1 967 148 126
Intergroup eliminations (189) (118) - -
Total 8 498 7 679 920 798
Group
Revenue increased by 11%, boosted by good volume growth in South Africa and
higher revenue from both the rest of Africa and Europe. Trading income
increased by 15% whilst the margin improved from 10.4% to 10.8%. Profit from
operations, however, declined by 2% mainly as a result of the costs associated
with the strategic review of the European operations and the fair value
adjustment of financial instruments.
The effective tax rate was 33.1% and was impacted by the costs of the European
strategic review which are not allowable as a deduction for tax purposes. The
rate in 2006 was 34.9% and included a higher proportion of Secondary Tax on
Companies.
Headline earnings per share before the adjustment to the fair value of financial
instruments increased by 17% from 82 cents to 96 cents. Working capital in the
cash flow statement includes higher levels of inventories and receivables as a
result of increased trading activity coupled with utilisation of accruals and
provisions as at 30 September 2006.
Total capital expenditure was R619 million with initial costs of the new
recycled-paper mill at Rosslyn being the single largest item of expenditure at
R92 million, followed by R89 million in respect of the project to manufacture
smooth-neck beverage cans with narrower diameter ends.
Net debt to equity increased from 28% in September 2006 to 42% in March 2007
mainly as a result of the capital expenditure programme and the increase in
working capital.
South Africa
Local demand for non-durable goods and improved export sales contributed to
volume growth of 4% which would have been even higher had it not been for the
shortage of carbon dioxide which reduced the demand for packaging for carbonated
soft drinks.
Higher oil prices resulted in an increase in the cost of polymer, which in most
cases was recovered. After a number of years of minimal increases, paper prices
increased by between 5% and 7% but, due to overcapacity in some sectors, could
not be fully recovered.
The higher capacity utilisation coupled with the lower cost-base resulted in
trading income increasing by 12% to R688 million. The trading margin increased
from 11.5% to 12.1%.
Rest of Africa
A good performance from most countries, particularly the metals business in
Zimbabwe, resulted in trading income increasing from R56 million to R84 million
and the trading margin increasing from 11.8% to 16.2%.
Europe
Trading results in Europe in pounds sterling were similar to last year with an
improvement in the plastics segment, offset by lower profits from the paper
segment. The average exchange rate to the pound was R14.02 compared to R11.14
last year.
SEGMENTAL REVIEW
Metals & Glass
Revenue Trading income Margin
2007 2006 2007 2006 2007 2006
Rm Rm Rm Rm % %
Africa 2 356 2 181 406 352 17.2 16.1
Africa
Overall segment sales increased by 8% and trading income by 15%, as a result of
improved factory utilisation.
Despite the shortage of carbon dioxide, beverage can volumes grew by 3% with
good contributions from both the domestic and export markets. Food can volumes
grew by 5% following good demand for canned vegetables, meat and fruit. Sales of
aerosol cans continued to show above-average growth in line with the overall
demand for personal care products.
Sales of glass bottles were substantially higher than last year as a result of
strong demand and increased stock availability due to improved factory
efficiencies following the manufacturing-improvement programme and capital
investment.
Demand for crowns in Zimbabwe was better than expected due to hot weather in the
country. In Kenya, the stronger Kenyan shilling resulted in the loss of some
local sales to imports whilst in Nigeria some customer overstocking led to
reduced demand.
Paper
Revenue Trading income Margin
2007 2006 2007 2006 2007 2006
Rm Rm Rm Rm % %
Africa 2 356 2 194 173 154 7.3 7.0
Europe 1 537 1 258 53 55 3.4 4.4
Total 3 893 3 452 226 209 5.8 6.1
Africa
Revenue increased by 7% and trading income by 12% resulting in an improvement in
the trading margin.
Sales volumes of corrugated boxes improved with good demand from deciduous fruit
growers. Industry overcapacity, however, reduced the ability to fully recover
higher paper prices. Costs were well managed and contributed to an improved
result.
Continued strong demand for fast-foods contributed to further volume growth of
folding cartons. Labels benefited from increased demand for beer and canned
food.
The ongoing robust demand for cement contributed to higher sales volumes of
paper sacks.
Sales of disposable diapers and toilet tissue continued their upward trend
buoyed by strong consumer demand. However, higher paper mill maintenance costs
impacted negatively on trading income.
The Zimbabwean operation received substantial export orders for tobacco boxes.
The folding cartons business in Nigeria continued to perform well although sales
were affected by a delay in the design of new tobacco packaging. Malawi was
affected by the stronger kwacha. The Zambian operations experienced strong
demand.
Europe
In sterling terms revenue decreased by 4% and trading income by 33%.
Folding carton sales volumes were lower than last year due to the loss of some
tender-related business. Healthcare packaging volumes and margins were similar
to last year.
Plastics
Revenue Trading income Margin
2007 2006 2007 2006 2007 2006
Rm Rm Rm Rm % %
Africa 1 506 1 455 139 137 9.2 9.4
Europe 765 595 79 55 10.3 9.2
Total 2 271 2 050 218 192 9.6 9.4
Africa
Revenue increased by 4% and trading income by 1% resulting in a small
deterioration in the trading margin.
There was continued strong demand for beverage containers and associated
closures. There was also good growth in sales of toothpaste tubes and food tubs,
however, some plastic crate market share was lost. In total, sales of products
made from rigid plastics were well up on last year. A long-term contract to
produce PET bottles was signed with a major customer in the Western Cape.
Overall sales and trading income of flexible packaging continued to improve but
were offset by lower sales of shopping bags, leaving total sales at a similar
level to last year.
Sales of plastic packaging in Zimbabwe continued to be affected by lower
consumer demand and a shortage of raw material.
Europe
In pound terms, sales increased by 1% and trading income by 14% due to improved
efficiencies and lower costs.
Group services
Revenue Trading income
2007 2006 2007 2006
Rm Rm Rm Rm
Africa - - 54 29
Europe 167 114 16 16
Intergroup eliminations (189) (118) - -
Total (22) (4) 70 45
Group services includes head office activities, procurement, treasury and
property rentals. The improvement in trading income is mainly due to lower
employment costs and general cost-control.
EUROPE STRATEGIC REVIEW
Shareholders are referred to the cautionary announcement issued on 16 February
2007 and last renewed on 14 May 2007. After considering various options in
connection with its businesses in the United Kingdom and Europe, including a
thorough investigation of the possible sale of the businesses, the board of
directors of Nampak has decided to retain these businesses within the Nampak
group. Further restructuring and other opportunities have been identified to
improve the overall performance of the businesses. The cautionary announcement
is therefore withdrawn and shareholders are no longer required to exercise
caution when dealing in Nampak`s securities.
Shareholders are referred to the "Withdrawal of Cautionary Announcement"
published today.
PROSPECTS
Consumer spending on non-durable goods in South Africa is expected to remain
buoyant for the remainder of this financial year and should continue to benefit
sales of packaging.
The group remains on track to deliver a solid set of results for the year.
DIRECTORATE
Mr PL Campbell retires as a non-executive director of the group with effect from
31 May 2007 after having served as a director for 23 years.
ORDINARY SHARE CASH DISTRIBUTION
Notice is hereby given that a cash distribution No.3 of 33.0 cents (2006: 30.0
cents) per ordinary share in lieu of a dividend by way of a reduction of share
premium has been declared in respect of the six months ended 31 March 2007,
payable to shareholders recorded as such in the register at the close of
business on the record date, Friday 13 July 2007. The last day to trade to
participate in the cash distribution is Friday 6 July 2007. Shares will commence
trading "ex" distribution from Monday 9 July 2007.
The important dates pertaining to this cash distribution are as follows:
Last day to trade ordinary shares "cum" Friday 6 July 2007
distribution
Ordinary shares trade "ex" distribution Monday 9 July 2007
Record date Friday 13 July 2007
Payment date Monday 16 July 2007
Ordinary share certificates may not be de-materialised or re-materialised
between Monday 9 July 2007 and Friday 13 July 2007, both days inclusive.
On behalf of the board
T Evans Chairman
GE Bortolan Chief executive officer
24 May 2007
Supplementary information
Profit from Abnormal items
Operations
2007 2006 2007 2006
Rm Rm Rm Rm
Adjusted segmental information
Metals and glass
Africa 377 352 29 -
Paper
Africa 148 157 25 (3)
Europe 51 55 2 -
Plastics
Africa 121 126 18 11
Europe 78 54 1 1
Group services
Africa 39 34 15 (5)
Europe (33) 16 49 -
Total 781 794 139 4
Trading income Margin before
before abnormal abnormal items
items
2007 2006 2007 2006
Rm Rm % %
Adjusted segmental information
Metals and glass
Africa 406 352 17.2 16.1
Paper
Africa 173 154 7.3 7.0
Europe 53 55 3.4 4.4
Plastics
Africa 139 137 9.2 9.4
Europe 79 55 10.3 9.2
Group services
Africa 54 29
Europe 16 16
Total 920 798 10.8 10.4
Basis of calculation
For segmental purposes, Bevcap is now included under Plastics (Africa) instead
of Metals (Africa). Comparative figures have been restated. The restatement
resulted in R26 million reclassified from Metals and Glass (Africa) to Plastics
(Africa) for both profit from operations and trading income.
Abnormal items are defined as items of income and expenditure which do not arise
from normal trading activities or are of such a size, nature or incidence that
their disclosure is relevant to explain the performance for the period.
Non-executive directors:
T Evans* (Chairman), PL Campbell*, DA Hawton*, MM Katz*, RJ Khoza, KM Mokoape*,
ML Ndlovu*, RV Smither*, MH Visser, RA Williams*.
*Independent
Executive directors:
GE Bortolan (Chief executive officer), N Cumming,
TN Jacobs (Chief financial officer).
Secretary: NP O`Brien
Registered office:
Nampak Centre, 114 Dennis Road
Atholl Gardens, Sandton 2196
South Africa
(PO Box 784324, Sandton 2146
South Africa)
Telephone: +27 11 719 6300
Share registrar:
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
Johannesburg 2001, South Africa
(PO Box 61051, Marshalltown 2107
South Africa)
Telephone: +27 11 370 5000
Sponsor:
UBS South Africa (Pty) Limited
These results and a presentation to analysts and shareholders are available on
the group`s website at www.nampak.com
Date: 24/05/2007 14:23:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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