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NPK - Nampak - Audited Group Results for the Year Ended 30 September 2009

Release Date: 23/11/2009 14:25
Code(s): NPK
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NPK - Nampak - Audited Group Results for the Year Ended 30 September 2009 NAMPAK LIMITED (Incorporated in the Republic of South Africa) (Registration number: 1968/008070/06) ISIN: ZAE000071676 Share code: NPK ("Nampak" or "the Company") AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2009 - Revenue increased by 6% - Cash generated by operations up 4% to R2.2 billion - Trading income decreased by 27% - Headline earnings per share decreased by 53% CONDENSED GROUP INCOME STATEMENT 2009 2008 Change Notes Rm Rm % Revenue 19 585.6 18 457.5 6.1 Trading income before 2 1 127.5 1 536.6 (26.6) abnormal items Abnormal items 3 (532.3) (587.3) Profit from operations 595.2 949.3 (37.3) Finance costs (441.7) (400.6) Finance income 113.8 135.2 Income from investments 5.5 5.1 Share of (loss)/profit from (0.5) 8.7 associates Profit before tax 272.3 697.7 (61.0) Income tax 70.2 202.4 Profit for the year 202.1 495.3 (59.2) Attributable to: Equity holders of the company 204.8 516.1 (60.3) Minority interest (2.7) (20.8) 202.1 495.3
Basic earnings per share 34.9 88.2 (60.4) (cents) Fully diluted earnings per 37.8 88.8 (57.4) share (cents) Headline earnings per 83.8 177.3 (52.7) ordinary share (cents) Fully diluted headline 85.3 174.7 (51.2) earnings per share (cents) Dividend and cash 42.0 100.0 distribution per share (cents) CONDENSED GROUP BALANCE SHEET 2009 2008 Notes Rm Rm ASSETS Non-current assets Property, plant and equipment and 6 392.9 6 746.6 investment property Goodwill and other intangible assets 389.4 473.1 Other non-current financial assets and 399.1 298.6 associates Deferred tax assets 200.9 11.6 7 382.3 7 529.9 Current assets Inventories 2 643.8 2 640.7 Trade receivables and other current 2 864.3 3 525.4 assets Tax assets 11.0 38.9 Bank balances, deposits and cash 4 1 016.1 1 727.9 6 535.2 7 932.9 Assets classified as held for sale 5 174.9 52.2 TOTAL ASSETS 14 092.4 15 515.0 EQUITY AND LIABILITIES Capital and reserves Capital reserves 6 (576.0) (76.8) Other reserves 7 (383.3) 176.0 Retained earnings 6 064.3 5 859.3 Equity attributable to equity holders 5 105.0 5 958.5 of the company Minority interest 24.5 33.4 Total equity 5 129.5 5 991.9 Non-current liabilities Loans and borrowings 2 121.5 1 741.1 Other non-current liabilities 36.5 71.1 Retirement benefit obligation 1 246.2 1 129.1 Deferred tax liabilities 293.1 495.9 3 697.3 3 437.2 Current liabilities Trade payables, provisions and other 3 307.0 3 366.5 current liabilities Bank overdrafts and loans 4 1 805.4 2 570.3 Tax liabilities 73.1 149.1 5 185.5 6 085.9 Liabilities directly associated with 5 80.1 - assets classified as held for sale TOTAL EQUITY AND LIABILITIES 14 092.4 15 515.0 CONDENSED GROUP CASH FLOW STATEMENT 2009 2008 Notes Rm Rm Operating profit before working 2 021.6 2 303.0 capital changes Working capital changes 198.4 (159.7) Cash generated from operations 2 220.0 2 143.3 Net interest paid (363.9) (324.8) Income from investments 5.5 14.2 Retirement benefits, contributions and (51.8) 250.9 settlements Income tax paid (416.4) (558.9) Replacement capital expenditure (466.4) (645.3) Cash retained from operations 927.0 879.4 Dividends paid (1.7) (1.7) Cash distributions paid (527.1) (644.8) Net cash retained from operating 398.2 232.9 activities Net cash utilised in investing (705.4) (803.5) activities Net cash utilised before financing (307.2) (570.6) activities Net cash (utilised in)/retained from (459.3) 2 817.5 financing activities Net (decrease)/increase in cash and (766.5) 2 246.9 cash equivalents Cash and cash equivalents at beginning 1 221.7 (1 000.0) of year Translation of cash in foreign (57.3) (25.2) subsidiaries Cash and cash equivalents at end of 4 397.9 1 221.7 year GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE 2009 2008 Rm Rm Exchange differences on translation of foreign (426.9) 262.1 operations Net actuarial loss from retirement benefit (135.3) (186.1) obligations (Loss)/gain on cash flow hedges (1.7) 7.4 Net (expense)/income recognised directly in (563.9) 83.4 equity Transfer to plant and equipment - cash flow - (7.4) hedges Transfer to income statement - cash flow hedges - 0.1 Profit for the year 202.1 495.3 Total recognised (expense)/income for the year (361.8) 571.4 Attributable to: Equity holders of the company (352.9) 585.5 Minority interest (8.9) (14.1) (361.8) 571.4 NOTES 2009 2008 Rm Rm 1. Basis of preparation The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 - Interim Financial Reporting. The accounting policies are consistent with those used for the group`s 2008 annual financial statements, which were prepared in accordance with International Financial Reporting Standards. 2. Included in trading income before abnormal items are: Depreciation 729.3 674.0 Amortisation 82.0 76.9 3. Abnormal items 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 Net impairment losses on goodwill, plant, 389.8 601.7 property and investments Retrenchment and restructuring costs 107.0 94.4 Financial instruments fair value loss/(gain) 54.1 (25.6) Impairments of loans to minority shareholders 36.9 - Share-based payment expense/(reversal) on BEE 18.0 (12.8) transaction Net profit on disposal of property (1.8) (19.5) Net profit on disposal of businesses (26.7) (5.4) Loss resulting from Thorpe fire - 50.8 Net onerous lease provisions (26.1) 64.7 (reversed)/raised Insurance proceeds from Thorpe fire (18.9) (161.0) 532.3 587.3 4. Cash and cash equivalents Bank overdrafts and loans (1 805.4) (2 570.3) Less: current portion of loans 53.1 93.1 Less: short-term loans and commercial paper 1 133.0 1 971.0 (619.3) (506.2) Add: bank balances, deposits and cash 1 016.1 1 727.9 Add: bank balances, deposits and cash 1.1 - included in assets held for sale 397.9 1 221.7 5. Assets held for sale The assets and liabilities attributable to business units and assets which are expected to be sold in the next 12 months have been classified as disposal groups held for sale and are presented separately in the balance sheet. The assets and disposal groups have been measured at fair value less cost to sell and an impairment charge of R52.0 million (2008: R12.5 million) has been recognised. 6. Capital reserves Share capital 35.6 35.5 Share premium 246.4 825.1 Treasury shares (1 150.0) (1 215.2) Share option reserve 292.0 277.8 (576.0) (76.8) 7. Other reserves Foreign currency translation reserve 24.7 447.0 Net recognised actuarial losses (346.4) (211.1) Other (61.6) (59.9) (383.3) 176.0
8. Supplementary information Capital expenditure 1 129.3 1 576.0 - expansion 653.5 908.3 - replacement 466.4 645.3 - intangibles 9.4 22.4 Capital commitments 593.0 1 187.7 - contracted 357.0 420.1 - approved not contracted 236.0 767.6 Lease commitments 383.3 488.6 - land and buildings 299.6 411.8 - other 83.7 76.8 Contingent liabilities 17.2 18.4 - customer claims and guarantees 17.2 18.4 9. Determination of headline earnings Profit attributable to equity holders of the 204.8 516.1 company for the year Less: preference dividend (0.1) (0.1) Basic earnings 204.7 516.0 Adjusted for: Net impairment losses on goodwill, plant, 389.8 601.7 equipment and intangible assets Net profit on disposal of businesses and (26.7) (5.4) other investments Net loss/(profit) on disposal of property, 33.0 (14.3) plant, equipment and intangible assets Europe loss on assets destroyed in the Thorpe - 40.2 fire* Europe insurance proceeds on fixed assets** - (125.2) Tax effects (110.1) 30.5 Minority interest - (5.7) Headline earnings for the year 490.7 1 037.8 * The total loss from the Thorpe fire in the prior year was R50.8 million of which R40.2 million related to fixed assets written off. ** The total insurance proceeds in the prior year were R161.0 million of which R125.2 million related to proceeds for fixed assets written off. NOTES (continued) 2009 2008 10. Share statistics Ordinary shares in issue (000) 659 264 658 142 Ordinary shares in issue - net of treasury 586 773 585 650 shares (000) Weighted average number of ordinary shares on which headline earnings and basic earnings per share are based (000) 585 858 585 301 Weighted average number of ordinary shares on which diluted headline earnings and diluted basic earnings per share are based (000) 602 185 607 684 11. Additional disclosures Net gearing 52% 43% Net debt: EBITDA* 1.6 times 1.1 times EBITDA: interest cover* 5.6 times 8.7 times Total liabilities:equity 173% 159% Return on equity 4% 9% Return on net assets 6% 10% Net worth per ordinary share (cents)** 874 1 023 Tangible net worth per ordinary share 808 942 (cents)** * EBITDA is calculated before net impairments **calculated on ordinary shares in issue - net of treasury shares 12. Related party transactions Group companies, in the ordinary course of business, entered into various purchase and sale transactions with associates, joint ventures and other related parties. The effect of these transactions is included in the financial performance and results of the group. The detailed disclosure is available for inspection at the registered office of the company. COMMENTS NAMPAK PROFILE Nampak is the largest packaging manufacturer in Africa with manufacturing operations in South Africa and in eleven other countries on the African continent. It produces packaging products from metal, glass, paper and plastics and is also a major manufacturer and marketer of tissue products. It is one of the leading suppliers of folding cartons to the food and healthcare sectors in Europe and is the major supplier of plastic bottles to the dairy industry in the UK. The group is actively engaged in the collection and recycling of all forms of used packaging. GROUP PERFORMANCE Revenue Trading income Margin
2009 2008 2009 2008 2009 2008 Rm Rm Rm Rm % % South Africa 13 307 12 291 843 1 222 6.3 9.9 Rest of Africa 1 403 1 056 69 71 4.9 6.7 Europe 5 220 5 441 216 244 4.1 4.5 Intergroup (344) (330) - - eliminations Total 19 586 18 458 1 128 1 537 5.7 8.3 Group Revenue grew by 6% due mainly to the recovery of raw material cost increases and an improvement in trading activity in the rest of Africa. Volumes were lower in both South Africa and Europe, but higher in the rest of Africa. Trading income decreased by 27% primarily as a result of a substantial loss in the Corrugated business (partly due to the late commissioning of the new Rosslyn paper mill) and a decline of 6% in volumes across the group. Losses at the Leeds folding cartons operation and in some smaller businesses in South Africa also impacted trading income negatively. Despite these challenges, trading income in many of the group`s core businesses was similar to last year. There were pleasing improvements in the performance of the rigid plastics and tissue businesses. Profit from operations decreased by 37% due mainly to impairments of assets, the most significant of which relates to the Corrugated business (R274 million), a loss on the fair valuation of financial instruments, as well as retrenchment and restructuring costs. Net finance costs increased by 24% to R328 million following the completion of several large capital projects in the prior year and the ongoing funding of the Angolan beverage can factory. The effective tax rate was 25.8% and is mainly attributed to government incentives and deferred tax assets raised in the current year, offset by disallowable expenses and impairments. Headline earnings per share decreased by 53% to 84 cents from 177 cents in the prior year. Total capital expenditure was R1 129 million, with the most significant spend being R118 million on the completion of the Rosslyn paper mill, R370 million on the Angolan beverage can factory and R48 million on the glass cullet plant. Despite the disappointing trading performance, cash generated from operations increased by 4% to R2 220 million with the net investment in working capital reducing by R198 million. Net borrowings increased by R326 million to R2 910 million, with net debt to equity increasing from 43% to 52%. South Africa The weaker economy had a major impact with sales volumes down by 6% year on year. Demand for food and beverage packaging held up relatively well but demand for household and industrial packaging fell substantially. Due to the difficult market conditions, additional provisions for receivables and inventory were necessitated.Provisions for claims were also increased in the year. A trading loss of R250 million in Corrugated and losses in other smaller businesses resulted in a decrease in trading income from R1 222 million to R843 million. The trading margin fell from 9.9% to 6.3%. Rest of Africa There was pleasing volume growth in the region. Overall, trading income was in line with last year, with good performances from Nigeria and Zambia, but Kenya made a small loss. Foreign currency translation losses contributed to trading income decreasing marginally from R71 million to R69 million. Europe Despite softer volumes, sales in pounds were unchanged from last year at '346 million whilst trading income decreased from '11.5 million to '7.6 million. The average exchange rate to the pound was R13.94 compared to R14.71 last year. Trading income was impacted by higher imported polymer costs, the liquidation of a major customer and a loss at the Leeds folding cartons operation. A major restructuring at the Newport Pagnell plastics factory was successfully undertaken. SEGMENTAL REVIEW Metals & Glass Revenue Trading Margin income
2009 2008 2009 2008 2009 2008 Rm Rm Rm Rm % % Africa 6 003 5 061 742 807 12.4 15.9 Africa Revenue increased by 19%, mainly as a result of the tinplate price increase, whilst trading income decreased by 8.1%. Demand for beverage cans from South African customers declined by 4%. Exports were slightly below last year resulting in total beverage can sales falling by 3%. Construction of the new beverage can factory in Angola is progressing well, however final regulatory approval is still awaited. Commissioning is now expected in the latter part of 2010. In the meantime, cans will continue being exported from South Africa. Food can volumes increased by 5% with stronger sales of fish cans and to a lesser extent vegetable cans but weaker sales of fruit, milk and pet food cans. Lower household discretionary income resulted in demand for aerosol, paint, polish and other industrial cans being well down on last year. There was continued good demand for glass bottles. A new cullet plant, which will enable greater quantities of recycled glass to be used, will be commissioned in the first half of 2010. Paper Revenue Trading income Margin 2009 2008 2009 2008 2009 2008 Rm Rm Rm Rm % %
Africa 5 460 5 121 (14) 253 (0.3) 4.9 Europe 3 317 3 312 77 41 2.3 1.2 Total 8 777 8 433 63 294 0.7 3.5 Africa Revenue increased by 7% but a substantial loss in the Corrugated business negated an otherwise acceptable performance from the other major businesses in this segment. Poor demand from both the agricultural and commercial sectors resulted in sales volumes of corrugated boxes being well down on last year. The new Rosslyn paper mill was commissioned in March, some six months later than expected. There was a substantial overrun of the approved capital expenditure of R504 million. The final costs were R798 million. An improvement in performance of the business is expected in 2010. Demand for folding cartons was generally weak across all market segments although sales to the fast-food sector showed continued good growth. Good sales volumes of toilet tissue and diapers and improved selling prices contributed to an improvement in overall performance of the tissue business. The folding cartons business in Nigeria continued to perform well although results in rand were adversely affected by the depreciation of the naira. Europe In pounds, sales increased by 6% to '238 million whilst trading income increased from '2.5 million to '5.5 million, which includes insurance proceeds from the fire at the Thorpe factory. The folding cartons market remains highly competitive in depressed economies and the Leeds operation incurred a loss. Sales in healthcare packaging were higher than last year and trading income increased, supplemented by the insurance proceeds. Plastics Revenue Trading Margin income 2009 2008 2009 2008 2009 2008 Rm Rm Rm Rm % %
Africa 3 247 3 165 163 161 5.0 5.1 Europe 1 508 1 769 93 164 6.2 9.3 Total 4 755 4 934 256 325 5.4 6.6 Africa Revenue increased by 3% and trading income by 1%. A reduction in the cost of polymer raw material which had risen substantially in 2008, contributed to the preservation of the trading margin. There was volume growth in plastic milk bottles which benefited from the introduction of a multi-layer bottle for long-life milk. Demand for PET bottles for juice and carbonated soft drinks remained firm. In Zambia, there was good growth for sorghum beer cartons but lower sales of plastic bottles. Sales volumes of plastic crates to the beverage industry were lower but were partially compensated for by higher sales of general-use crates. Demand for plastic drums declined. The tubes and tubs factory in Durban was closed and the production equipment relocated to Johannesburg. The plastic industrial container market was very depressed with demand for paint buckets particularly impacted. Demand for metal closures for food containers was flat but there was strong demand for wine screw-closures. Sales volumes of plastic closures used on milk and juice bottles were at a similar level to last year. Margins in the flexible packaging business improved. Overall demand was depressed but market share was gained at major customers. The Flexpak business was sold and the expanded polyethylene foam business was closed due to poor profitability. Europe Revenue in pounds decreased by 11%. Due to the liquidation of a major customer and the closure of three other dairies, trading income declined by 42% to '6.7 million. Group services Trading Revenue income 2009 2008 2009 2008
Rm Rm Rm Rm Africa - - 21 73 Europe 394 359 46 38 Intergroup eliminations - - - - Total 394 359 67 111 Group services comprise corporate functions, procurement, treasury and property rentals. The decrease in trading income is mainly due to the costs of restructuring in South Africa. AUDITED RESULTS The consolidated financial statements for the year have been audited by Deloitte & Touche and their accompanying unmodified audit report on the annual financial statements, as well as their unmodified audit report on this set of condensed financial information is available for inspection at the registered office of the company. The annual report will be posted to shareholders in December 2009. TRADING UPDATE Basic earnings per share for 2009, at 34.9 cents, are 60.4% less than the previous year. The decrease is greater than the range indicated in the trading update dated 28 October 2009 and was impacted by the impairment charge, which was only finalised at the board meeting of today`s date. PROSPECTS The state of the economies in which we operate is still a cause for concern and there has been no noticeable improvement in volumes since year end. The strength of the rand will continue to hamper an improvement in trading conditions in the South African businesses. Volatility of input costs may negatively impact trading income in the early part of the year. The expected turnarounds in the South African corrugated and UK Leeds cartons business as well as the exiting of some of our underperforming businesses, should enable the group to improve profitability for the year ahead. An update on trading conditions will be provided at the annual general meeting to be held on 3 February 2010. The financial information on which this prospects statement is based, has not been audited or reviewed by the group`s auditors. CHANGES IN THE DIRECTORATE As previously reported Mr AB Marshall was appointed an executive director and chief executive officer with effect from 1 March 2009. Mr GE Bortolan retired as an executive director on 31 March 2009. On 21 November 2008, Messrs RC Andersen and PM Madi were appointed non- executive directors and Mr RA Williams retired. On 29 July 2009, Messrs DA Hawton and MM Katz resigned as non-executive directors and Mr PM Surgey was appointed a non-executive director. Mr FV Tshiqi was appointed an executive director on 29 July 2009. Mr TN Jacobs resigned as an executive director and chief financial officer on 31 August 2009 and Mr G Griffiths was appointed an executive director and chief financial officer on 1 September 2009. Subsequent to 30 September 2009, Messrs ML Ndlovu and KM Mokoape resigned as non-executive directors on 16 October 2009 and 23 October 2009 respectively. Ms DC Moephuli was appointed a non-executive director on 23 November 2009. Mr T Evans has announced his intention to step down as chairman in the new year and a replacement process has started. DECLARATION OF ORDINARY DIVIDEND NUMBER 75 Notice is hereby given that final dividend No. 75 of 24.0 cents per share (2008: capital reduction of 72.0 cents per share), has been declared in respect of the year ended 30 September 2009, payable to shareholders recorded as such in the register at the close of business on the record date, Friday 15 January 2010, making a total distribution for the year of 42.0 cents (2008:100.0 cents). The last day to trade to participate in the dividend is Friday 8 January 2010. Shares will commence trading "ex" dividend from Monday 11 January 2010. The important dates pertaining to this dividend are as follows: Last day to trade ordinary shares "cum" Friday 8 January 2010 dividend Ordinary shares trade "ex" dividend Monday 11 January 2010 Record date Friday 15 January 2010 Payment date Monday 18 January 2010 Ordinary share certificates may not be de-materialised or re-materialised between Monday 11 January 2010 and Friday 15 January 2010, both days inclusive. On behalf of the board T Evans Chairman AB Marshall Chief executive officer 23 November 2009 NAMPAK LIMITED Non-executive directors: T Evans* (Chairman), RC Andersen*, RJ Khoza, PM Madi*, DC Moephuli, CWN Molope*, RV Smither*, PM Surgey*, MH Visser. *Independent Executive directors: AB Marshall (Chief executive officer), G Griffiths (Chief financial officer), FV Tshiqi (Group human resources). Secretary: NP O`Brien Registered office: Share registrar: Nampak Centre, 114 Dennis Road Computershare Investor Atholl Gardens, Sandton 2196 Services (Pty) Limited South Africa 70 Marshall Street (PO Box 784324, Sandton 2146 Johannesburg 2001, South Africa South Africa) (PO Box 61051, Marshalltown 2107 Telephone: +27 11 719 6300 South Africa) Telephone: +27 11 370 5000
Sponsor: UBS South Africa (Pty) Limited Supplementary information Profit from Abnormal Trading Margin before
operations items income abnormal before items abnormal items
2009 2008 2009 2008 2009 2008 2009 2008 Rm Rm Rm Rm Rm Rm % % Adjusted segmental information Metals and Glass Africa 730 812 (12) 5 742 807* 12.4 15.9* Paper Africa (392) 229 (378) (23) (14) 253 (0.3) 4.9 Europe 87 (526) 10 (567) 77 41 2.3 1.2 Plastics Africa 141 104 (22) (57) 163 161 5.0 5.1 Europe 60 166 (33) 2 93 164 6.2 9.3 Group services Africa (75) 122 (96) 49 21 73* Europe 44 42 (1) 4 46 38 Total 595 949 (532) (587) 1 128 1 537 5.8 8.3 * Restated to reflect the re-allocation of rebates. Disclaimer We may make statements that are not historical facts and relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. Words such as "believe", "anticipate", "expect", "intend", "seek, "will", "plan", "could", "may", "endeavour" and "project" and similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that predictions, forecasts, projections and other forward- looking statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, actual results may be very different from those anticipated. The factors that could cause our actual results to differ materially from the plans, objectives, expectations, estimates and intentions in such forward- looking statements are discussed in each year`s annual report. Forward- looking statements apply only as of the date on which they are made, and we do not undertake other than in terms of the Listings Requirements of the JSE Limited, to update or revise any statement, whether as a result of new information, future events or otherwise. All profit forecasts published in this report are unaudited. Investors are cautioned not to place undue reliance on any forward-looking statements contained herein. Date: 23/11/2009 14:25:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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