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Trading Statement for the Year Ended 30 September 2016
NAMPAK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1968/008070/06)
ISIN: ZAE 000071676
Share code: NPK (“Nampak”)
Trading Statement for the Year Ended 30 September 2016
Nampak is in the process of finalising its results for the year ended 30 September 2016. In terms of
the JSE Listings Requirements, shareholders are advised that Nampak is satisfied that a reasonable
degree of certainty exists that its headline earnings per share (HEPS) for the period ended 30
September 2016 for continuing operations will differ by more than 20% from the results of the
previous year.
In the face of a number of macroeconomic challenges experienced during the financial year, Nampak
expects trading profit for the year, before abnormal items to increase by between 2% and 7%,
supported by the turnaround at Glass, good trading in the rest of Africa, particularly Nigeria, volume
increases from new customers and benefits from business and operational improvements. However,
abnormal items (listed below) significantly impacted the group’s earnings for the year:
- The R1.3 billion capital profit from the South African property sale and leaseback transaction.
- The foreign exchange losses incurred in Nigeria and Angola resulting from the devaluation of the
naira and kwanza due to in-country US dollar (USD) shortages that rendered the timing and
quantum of conversion from in-country currencies to USD uncertain and sporadic, amounted to
between R670 million and R700 million.
- Asset impairments of between R355 million and R370 million related mainly to the planned
conversion of the Angolan tinplate line to aluminium in future years.
Excluding foreign exchange losses, HEPS declined by between 13% and 18%.
The earnings per share (EPS) and HEPS for the year ended 30 September 2016, from continuing
operations, are expected to vary from those reported in the comparative period within the following
ranges:
Expected range 30 September
30 September 2016 2015 % Change
Continuing operations
(cents) (cents)
EPS (1) 249.0 259.0 228.3 9% – 13%
HEPS (2) 105.0 110.0 208.2 (47%) - (50%)
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(1) includes capital profit, foreign exchange losses and asset impairments
(2) excludes capital profit and impairments, but includes foreign exchange losses
EPS and HEPS were adversely impacted by higher interest costs and a higher tax rate compared to the previous
year.
Sale and leaseback transaction – capital profit
During the year, Nampak entered into a sale and leaseback transaction of fifteen properties in
Nampak’s South African property portfolio and an outright sale of one property effective 1 September
2016. The sale price of R1.7 billion was received in full by the group during September 2016. The
book value of the net assets as at 30 September 2015 included in the transaction was R382 million
with a capital profit of R1.3 billion on disposal of the properties. Capital Gains Tax (CGT) on the
transaction is expected to be negligible as assessed CGT losses incurred during certain divestitures
will be offset against the capital profit on the transaction. This transaction has enabled Nampak to
deleverage its balance sheet and strengthen the group’s covenant positions. The group’s net gearing
ratio is expected to reduce to between 47% and 52% (2015: 72%) as a consequence of the increase
in equity and the reduction in interest bearing debt that resulted from the transaction.
Nigeria and Angola: liquidity constraints and currency devaluations
The macroeconomic environment in Nigeria and Angola remained challenging during the 2016
financial year. Nampak operations were adequately funded with raw material supply secured through
the group’s offshore procurement and treasury office on the Isle of Man (IOM). During the period
inventory levels were successfully managed down and to the extent possible, appropriate hedging
instruments were secured thereby reducing the foreign exchange risks.
At 30 September 2016 the equivalent of USD45 million USD indexed kwanza bonds were acquired as
a hedge, up from the USD25 million at 31 March 2016. For the year ended 30 September 2016
repayments amounting to USD40 million were received in respect of goods and services procured on
behalf of the Angolan operation representing liquidity of 95% (2015: 31%) of invoices presented for
payment in the year, with the IOM funding the shortfall through financing facilities. In the year to 30
September 2016, the kwanza depreciated by 23% against the USD.
During the year the equivalent of USD26 million in USD deliverable forward contracts were secured
as a hedge for the Nigerian operations, with the majority maturing during November 2016. In addition,
repayments in an amount of USD23 million were made to the IOM in respect of goods and services
procured on behalf of the Nigerian operations representing liquidity of 57% (2015: 91%) of invoices
presented for payment in the year. This excludes the aforementioned USD 26 million hedged through
deliverable forward contracts. Again, the IOM funded the shortfall through financing facilities. In the
year to 30 September 2016, the naira depreciated by 58% against the USD.
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At 30 September 2016 Nampak cash balances in both countries amounted to R2.0 billion, up from
R1.5 billion at 31 March 2016 and R700 million at 30 September 2015. At the year end, R971 million
or 49% of these cash balances were hedged. On translation of the Nigerian and Angolan monetary
items to the USD for USD functional currency operations and the USD based liabilities to naira and
kwanza, respectively, at the ruling official exchange rate, the group incurred between R670 million
and R700 million (2015: R161 million) in foreign exchange losses with Nigeria contributing the
majority of this loss. All foreign currency translations and foreign currency transactions are translated
using the official exchange rate in line with the requirements of International Financial Reporting
Standards and foreign exchange regulations in individual countries.
Impairments
The group performed impairment testing on the carrying value of goodwill and concluded that no
impairment of goodwill was required for the year ended 30 September 2016.
The tinplate beverage can line in Angola has been impaired, consistent with the group’s intention to
replace it with an aluminium line. Nampak intends to fund the conversion project from existing kwanza
cash balances subject to the allocation by the Angolan authorities of the required foreign exchange.
Total asset impairments during the year are expected to range between R355 million and R370
million.
Nampak will release its group results for the year ended 30 September 2016 on 21 November 2016.
The financial information on which the trading statement is based has not been reviewed or reported
on by Nampak’s auditors.
Bryanston
09 November 2016
Sponsor: UBS South Africa (Pty) Ltd
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