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Trading Statement and Update for the Year Ended 30 September 2015
NAMPAK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1968/008070/06)
ISIN: ZAE 000071676
Share code: NPK (“Nampak”)
Trading Statement and Update for the Year Ended 30 September 2015
Nampak is in the process of finalising its results for the year
ended 30 September 2015. Shareholders are therefore advised that
Nampak has a reasonable degree of certainty on the outcome of its
results.
Comments from Nampak Chief Executive André de Ruyter:
“During the 2015 financial year, Nampak significantly streamlined
its portfolio with the finalisation of the divestiture of
Corrugated, Tissue, Flexible, Recycling and Sacks divisions. This
process was accompanied by a strong focus on cost management and
operational efficiency improvements within the remaining divisions.
Large capital projects were successfully commissioned, including the
first aluminium beverage can line in Rosslyn, and a second can line
in Angola. Operating challenges initially experience at our Glass
facility were substantially resolved by year-end, and the higher
than anticipated spoilage rates at the Springs beverage can
operation were brought under control. The legacy of these
operational challenges has, however, had a negative impact on our
earnings. Outside South Africa we continue to navigate a
challenging macroeconomic environment in countries where we operate
and currency issues in Angola and Nigeria have had an impact on our
ability to repatriate earnings from these operations. We were able
to defend our strong market positions with the successful conclusion
of long term sales agreements in our Bevcan, DivFood and Glass
businesses. Our balance sheet remains strong, with sufficient
headroom to our debt covenants.”
Management remains focused on delivering improved performance and is
making significant progress in unlocking operating leverage from our
recent capital investments. Prudent capital allocation, further cost
reductions and operational improvement initiatives are expected to
benefit the bottom line during the 2016 financial year.
Segmental update
Metals delivered a pleasing increase in operating profit despite the
challenging macroeconomic conditions in Nigeria and Angola and the
relatively high spoilage at the Bevcan Springs factory in South
Africa. Ongoing Bevcan volume growth contributed to this
performance. A smooth decline in spoilage levels from the new
aluminium lines and a reduction in spoilage at the Springs facility
were reported. Contractual US dollar (USD) selling prices in Angola
and Nigeria partly protected revenue against the impact of local
currency devaluation. However, currency devaluation on foreign
exchange translation had a negative impact on earnings, while group
equity was substantially bolstered by an increase in the group’s
foreign currency translation reserves. DivFood performed according
to expectation supported by stable volumes and good cost control.
The division is on target to deliver further improvements in
performance in 2016, when the business and operational improvement
initiatives are expected to start contributing to profits. The
general metal packaging businesses in the rest of Africa were
marginally negatively impacted by weaker agricultural harvests and
negative forex impacts.
Plastics produced an improved performance driven mainly by the
benefits resulting from site consolidation and cost management
initiatives, as well as a weaker South African rand (ZAR) to the
British pound (GBP) exchange rate.
Paper benefited from the consolidation of the Nampak Zimbabwe
divisions (previously equity accounted) and the full acquisition of
Bullpak (previously 50% owned) in Kenya. The Paper segment was
negatively impacted by lower sorghum beer carton demand in Zambia
due to temporary operational issues at a customer and weaker demand
for cigarette packaging in Nigeria in the first half of the calendar
year. Both these sectors recovered during the second half.
Glass had an improved second half performance with operational
efficiencies returning to acceptable levels. The factory is now
operating in line with management’s expectations with trading
profits being delivered in the latter months of the financial year.
The performance is anticipated to continue improving through the
2016 financial year and we expect to remain unconstrained by demand
for glass in the South African market.
Glass capitalisation
The construction of the third glass furnace was more complex than
anticipated with the operation initially not meeting management’s
investment and operational expectations on which the investment
decision was predicated. The capitalisation of the project in terms
of International Financial Reporting Standards was finally completed
on 31 July 2015 with improved performance from the operation being
achieved in the latter part of the financial year. Indications are
that further improvements will be delivered during the 2016
financial year.
Forex movement
The year was characterised by a weakening in the ZAR exchange rate
compared to its major trading currencies with a significant portion
of this deterioration occurring in the last quarter of the financial
year. Consequently, the respective year-end closing exchange rates
for the USD and GBP were 22.7% and 14.4% above the rates for the
previous year. The weakening in the exchange rate has positively
impacted the group’s equity with the foreign currency translation
reserve benefiting from the ZAR’s weakness. In addition, the weaker
ZAR/USD exchange rate positively impacted the results of foreign
operations on consolidation, with earnings being translated at a
higher ZAR/USD exchange rate. The average ZAR/USD exchange rate for
the year was R12.02 compared to R10.58 for the same period in the
prior year, while the average ZAR/GBP exchange rate was R20.97
compared to the prior year of R18.33.
The weakened Angolan and Nigerian currencies, on the back of the low
crude oil prices combined with capital controls that render the
timing and quantum of conversion from in country currencies to USD
uncertain, have resulted in forex losses arising from a lack of
liquidity in foreign currency in those countries. Total foreign
exchange losses for the group of R141 million were incurred for the
year. Where possible, management is utilising measures at its
disposal to address exposure to further currency depreciation, but
cannot rule out foreign exchange losses during the 2016 financial
year.
Gearing
At the year-end, ZAR and USD denominated debt contributed almost
equal proportions to the Group’s overall net interest bearing debt.
The group’s gearing has been well managed during the year with
gearing levels similar to the prior year despite a significant
decline in the ZAR/USD exchange rate at year end which adversely
affected the translation of the group’s USD based debt at the
balance sheet date. Notwithstanding this, debt levels evaluated on
both net debt to earnings before interest, depreciation and
amortisation and interest cover remain well within debt covenants.
Tax rate
The effective tax rate for the group is expected to be significantly
lower than for the half year results mainly due to government tax
allowances in Nigeria and utilisation of capital gains tax losses on
property disposals in South Africa.
Financial Update
Continuing operations
Trading profit from continuing operations for the year ended 30
September 2015 is expected to increase by between 8% and 12%. HEPS
from continuing operations for the year is expected to reflect a
decline of between 4% (8.9 cents) and 8% (17.8 cents) compared to
221.9 cents achieved in the previous year. The expected decrease in
earnings is primarily attributable to the loss made by Glass and
foreign exchange losses.
EPS from continuing operations for the year is expected to reflect a
decline of between 2% (4.4 cents) and 4% (8.9 cents) compared to
that of 221.7 cents achieved in the previous year.
Continuing and discontinued operations
During the 2015 financial year, Nampak successfully disposed of the
Corrugated, Tissue, Flexible, Recycling and Sacks divisions and
these divisions were subsequently classified as discontinued
operations impacting their contribution to continuing operations
performance. HEPS from continuing and discontinued operations for
the year (i.e. comparing HEPS before divestitures with HEPS after
divestures) is expected to reflect a decline of between 20% (47.0
cents) and 24% (56.3 cents) compared to that of 234.7 cents achieved
in the previous year. EPS from continuing and discontinued
operations for the year is expected to reflect a decline of between
10% (18.6 cents) and 14% (26.1 cents) compared to that of 186.3
cents achieved in the previous year.
The table below sets out the impact of all HEPS and earnings per
share (EPS) movements:
Expected range
30 September
30 September 2015
2014 (cents)
(cents)
HEPS – continuing
221.9 213.0 204.1
operations
(4%) (8%)
HEPS – continuing
and discontinued 234.7 187.7 178.4
operations
(20%) (24%)
EPS – continuing
221.7 217.3 212.8
operations
(2%) (4%)
EPS – continuing and
discontinued 186.3 167.7 160.2
operations
(10%) (14%)
Nampak is expected to release group results for the year ended 30
September 2015 on 26 November 2015. The financial information on
which the trading statement is based has not been reviewed or
reported on by Nampak’s auditors.
Bryanston
12 November 2015
Sponsor: UBS South Africa (Pty) Ltd
About Nampak
Nampak is Africa’s largest diversified packaging manufacturer by
volume and revenue. We leverage the skills of our 6 700 people and
capitalise on our substantial investment in state-of-the-art
facilities to produce world-class metal, glass and rigid plastics
packaging from facilities in 11 countries across Africa, and in the
United Kingdom. Our customers – many of them large fast-moving
consumer goods companies – benefit from our extensive research and
development services, which provide them with innovative solutions
that promote their own products while keeping their impact on the
environment in check.
Date: 12/11/2015 11:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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