Wrap Text
Unaudited group results and ordinary dividend announcement for the half year ended 31 March 2017
Nampak Limited
(Registration number 1968/008070/06)
(Incorporated in the Republic of South Africa)
Share code: NPK ISIN: ZAE 000071676
Unaudited group results and ordinary dividend announcement
for the half year ended 31 March 2017
* Group revenue of R9.3 billion, down 1% with foreign operations results
impacted by a 10% stronger average ZAR/USD exchange rate
* Group trading profit of R1.1 billion, up 12%
* Trading profit from the Rest of Africa of R610 million, up 32%, now
55% of group trading profit
* Group operating profit of R1.1 billion up 30%
* Net profit for the period of R853 million up 41%
* Earnings per share of 120.8 cents up 15%
* Headline earnings per share of 113.1 cents up 8%
* Net gearing at 51% is within target range with significant headroom in
funding covenants
* Nigeria and Angola risk and exposure successfully managed cash
extraction rate at 80% and 61% of in country cash balances hedged
* USD54 million cash extraction expected from Nigeria before 30 September 2017
Comments from the CEO, Andre de Ruyter
During the period, Nampak delivered good results in spite of a challenging
trading environment, with group operating profit of R1.1 billion up 30% from
prior year accompanied by a 12% increase in trading profit. This was due to
record beverage can sales in Angola; improved results from Bevcan South Africa,
Nigeria general metal packaging, liquid packaging in South Africa as well as
paper packaging in Zimbabwe. Nampak's comprehensive plan to improve operational
performance also contributed, with margins improving to 11.9% from 10.5% in 2016.
This improvement is pleasing in view of the 10% strengthening in the average
ZAR/USD (South African rand/US dollar) exchange rate that impacted the translation
of foreign earnings to ZAR. Trading conditions, across the continent, were
characterised by sluggish growth and low consumer confidence which impacted
consumer spending and hence demand for packaging with group revenue slightly
down 1% for the period.
Being mindful of the challenging and uncertain macroeconomic environment, we
continue to focus on managing and optimising aspects of the business within our
control, namely costs, asset performance and processes. Capex spend of R470 million
for the period was tightly controlled and hence 49% lower than the prior year with
significantly improved project management capability. Key projects were delivered on
time, within budget and with operational efficiencies meeting expectations. The
asset recapitalisation programme in South Africa is almost complete and already
contributing to improved efficiencies and competitiveness.
It is expected that consumer demand will remain subdued for the rest of the year
affected by various macroeconomic dynamics. Accordingly, internal efficiencies
and cost control remain key focus areas with cost savings of R70 million recorded
for the period.
The substantially strengthened Nampak statement of financial position has
significantly enhanced our ability to be resilient during continued macro-economic
uncertainty. Group net gearing at 51% remains within the target range and short term
liquidity ratios are strong. Adequate funding facilities, to be used prudently, are
available both internationally and locally, and the group remains well within its
debt covenants.
Cash held in the restricted areas of Nigeria and Angola increased to R2.4 billion
from R1.5 billion at 31 March 2016 and R2.0 billion at 30 September 2016 on the back
of strong cash generation. Cash extraction from both countries remains a key focus
area in an effort to mitigate currency devaluation risk. The combined cash extraction
rate in these countries was 80% and the cash position hedged was 61% at 31 March 2017,
up from 50% at 30 September 2016. The slower than optimal cash extraction as well as
the exposure to currency volatility on the cash and monetary items remain risk areas to
the extent that the positions are not fully hedged.
In view of the current risks and challenges, Nampak has decided not to declare an
interim ordinary dividend, rather focusing its efforts on conserving cash. The medium
to long term outlook for packaging in key African markets remains favourable,
underpinned by expected growth in household consumption.
Group performance review
Group performance from continuing operations
R million 2017 2016 % change
Revenue 9 331 9 422 (1)
Trading profit 1 108 989 12
Abnormal gains/(losses) 24 (119) -
Operating profit 1 132 870 30
Profit for the period 853 606 41
Basic earnings per share (cents) 120.8 105.0 15
Headline earnings per share (cents) 113.1 105.2 8
Group revenue at R9.3 billion was 1% lower for the six months to 31 March 2017, with
a 10% stronger average ZAR/USD exchange rate negatively impacting translation of
foreign operations. Strong revenue growth of 11% was achieved by the Metals
division and is attributable to robust beverage can sales in Angola and improved
volumes from Bevcan SA. This strong performance was offset by negative growth in the
Plastics division outside of South Africa, lower demand in most markets in the Paper
division as well as a subdued performance by the Glass division, owing to softer demand.
The Metals division strengthened its trading profit by R261 million and trading margin
to 15.9% for the six months ended 31 March 2017, resulting in an overall improved
group margin of 11.9% from 10.5%. Operating profit improved by 30% to R1.1 billion.
This was primarily as a result of net abnormal gains of R24 million compared to net
abnormal losses of R119 million in the prior year which were largely attributable to a
devaluation in the Angolan kwanza in December 2015.
The effective tax rate for the period increased from 4% to 9% primarily as a result of
deferred tax assets raised in the current period being lower than the prior period mainly
due to the utilisation of capital gains tax losses on the sale and leaseback transaction
in 2016. The tax rate is lower than previous guidance owing to a higher profit contribution
from particularly Angola where we currently have the benefit of a tax holiday. Future
effective tax rates will be impacted by relative contributions from Nigeria and Angola,
with the tax rate in 2018 expected to increase to between 15% and 20%. The Bevcan Nigeria
pioneer status expires on 31 December 2017 which will impact Nampak's tax rate in FY2018
while the Bevcan Angola tax holiday ends on 31 December 2018 which will impact Nampak's tax
rate in FY2019.
Basic earnings per share advanced by 15% to 120.8 cents per share. An increased minority
share of earnings coupled with a 1% increase in the weighted average number of shares in
issue impacted earnings per share. Headline earnings per share consequently increased by
8% to 113.1 cents per share.
The net working capital cycle absorbed R912 million during the period (2016: R488 million).
The increased absorption was mainly due to R223 million invested in inventory compared to a
R169 million reduction in the first six months of 2016. This was mainly due to an increased
funding of inventories required to meet increased demand in Angola. A lower inflow from
trade receivables relative to the prior year was in the main compensated for by a lower
absorption of cash in accounts payables as capital project expenditure reduced. The quality
of the group's accounts receivables book remains extremely good. The release of cash into
the working capital cycle from inventory in the prior year was achieved through the right
sizing of inventory levels off high inventory holdings at September 2015 that benefited
both the first and second halves of the 2016 financial year. The business started the first
half of the 2017 financial year with very low inventory and trade receivables levels owing
to the good progress made in managing inventories and account receivables in 2016.
The balance sheet remained strong on the back of the reduction of borrowings achieved in
2016, the strengthening of the ZAR as well as lower investment in capital expenditure during
the period, compared to prior periods. Proceeds from the sale and leaseback transaction
received in September 2016 were utilised to reduce interest bearing debt in South Africa,
reducing net borrowings to R5.2 billion. This led to a 17% lower net interest expense and
improved net gearing to 51% from 74% in the comparative period.
Whilst the group experienced ongoing currency volatility and liquidity constraints in
Angola and Nigeria, the situation continued to be monitored closely. Foreign exchange
allocations for the six months to 31 March 2017 from Angola were at an average of 80% of
invoices presented for payment, whilst foreign exchange allocations in Nigeria also
improved to 80% for the period. Cash held in these restricted areas increased to
R2.4 billion from R1.5 billion at 31 March 2016 and R2.0 billion at 30 September 2016
on the back of strong cash generation. The combined hedged position of 61% at 31 March 2017
was up from 25% at 31 March 2016 and 50% at 30 September 2016. The slower than optimal
cash extraction as well as the exposure to currency volatility on the cash and monetary
items remain risk areas to the extent that the positions are not fully hedged.
Nampak's cash, cash extraction rates and hedging positions in Angola and Nigeria at
different periods are presented below:
At 31 March 2017
R million Angola Nigeria Total
Cash on hand 1 436 955 2 391
Hedged 1 107 344 1 451
Net unhedged cash 329 611 940
Cash extraction rate (%)* 80 80 80
% of cash on hand hedged 77 36 61
At 30 September 2016
R million Angola Nigeria Total
Cash on hand 1 004 984 1 988
Hedged 614 376 990
Net unhedged cash 390 608 998
Cash extraction rate (%)* 95 57 77
% of cash on hand hedged 61 38 50
At 31 March 2016
R million Angola Nigeria Total
Cash on hand 474 1 018 1 492
Hedged 367 - 367
Net unhedged cash 107 1 018 1 125
Cash extraction rate (%)* n/a n/a n/a
% cash on hand hedged 77 - 25
* Cash extraction rate = cash extracted in period as a percentage of invoices presented
for payment in the period.
Nampak's operations are exposed to various exchange rates. Below is a table that shows
average and closing exchange rate movements for the current period, compared to the
same period in the prior year:
Exchange rate movements Closing
31 March 31 March 30 Sept
2017 % 2016 2016
ZAR/USD 13.41 9 14.69 13.72
ZAR/GBP 16.83 20 21.15 17.80
NGN/USD 314.29 (58) 199.05 315.00
AOA/USD 171.73 (3) 166.32 171.72
Exchange rate movements Average
31 March 31 March 30 Sept
2017 % 2016 2016
ZAR/USD 13.57 10 15.04 14.79
ZAR/GBP 16.83 24 22.13 21.07
NGN/USD 311.69 (57) 198.91 229.60
AOA/USD 171.73 (13) 151.73 161.57
The ZAR strengthened against the USD and GBP (British Pound) in the period under
review and there has been no devaluation in the official exchange rates of the
kwanza and naira since September 2016. Period on period, there has been a 58%
devaluation in the closing rate of the naira and a 3% weakening in the kwanza rate.
All figures have been translated at the official exchange rates.
Nigeria foreign exchange rate and liquidity update for the period post half-year
end, 31 March 2017
Further progress has been made in the extraction of cash from Nigeria with at least
USD54 million in cash extraction expected to be achieved before the financial year
end (30 September 2017), further strengthening the group's ability to fund the Rest
of Africa growth markets. This extraction consists of the following:
* USD29 million secured dollar deliverable forwards, 98% of which will mature
before 30 September 2017;
* an additional USD25 million secured after 31 March 2017 through the newly
introduced NAFEX market (Nigerian Autonomous Foreign Exchange market), USD10 million
of which has already been remitted to the group's offshore treasury operation with
the balance of USD15 million to flow before 30 September 2017 with no significant
counter-party risk.
At the current Central Bank of Nigeria ("CBN") official exchange rate, only USD29 million
of the aforementioned USD54 million dollars will be exposed to devaluation through the
income statement in the second half of the financial year with an anticipated abnormal
foreign exchange loss between R95 million and R110 million at current exchange rates.
The USD29 million comprises USD4 million of deliverable forwards and USD25 million secured
on the NAFEX market post 31 March 2017. A significant portion of the foreign exchange
losses attributable to the USD deliverable forwards were recognised in the prior
financial year.
Should further cash, in addition to the USD54 million mentioned above be extracted,
it may be exposed to further abnormal foreign exchange losses. Should there be an
official devaluation in the respective central banks official exchange rates to the
dollar for either the naira or the kwanza, further foreign exchange losses could be
incurred in the second half of the financial year on the translation of the portion
of unhedged monetary items. These foreign exchange losses could be further impacted by
movements in the ZAR/USD exchange rate.
Based on the current monthly funding requirements in these countries the group can fund
the respective operations, without raising any additional debt or equity, for
approximately 36 to 40 months even if no further cash is extracted.
Segmental performance review
Segmental report (continuing operations)
Revenue Trading profit* Trading margin (%)
R million 2017 2016 2017 2016 2017 2016
Metals 5 570 5 041 883 622 15.9 12.3
Plastics 2 400 2 891 89 202 3.7 7.0
Paper 698 831 57 95 8.2 11.4
Glass 663 659 42 44 6.3 6.7
Corporate Services - - 37 26 - -
Total 9 331 9 422 1 108 989 11.9 10.5
* Operating profit before abnormal items.
Metals
This cluster benefited from buoyant sales in Angola's beverage can market and increased
volumes from South Africa's new beverage can ends plant, with revenue up 11%. Trading
profit was up 42% and the margin at 15.9% was an improvement on the previous year's
performance of 12.3%. The overall performance of the cluster was impacted by lower sales
in the remaining units. Contractual USD linked prices in Nigeria and Angola continue to
abate the impact on revenue and margins of local currency volatility.
Bevcan South Africa's beverage can volumes were marginally lower, as a result of constrained
consumer demand. The newly commissioned ends plant expansion, which was commissioned on
time and executed within budget, contributed positively to revenue. Previously imported
ends into Nigeria and Angola were replaced by ends produced in South Africa. Following the
installation of capacity to manufacture 500ml cans, revenue expanded and trading profit was
significantly higher due to an improvement in internal efficiencies. The closure of the
Durban facility became effective on 15 December 2016 and delivered cost savings in the six
month to the end of March 2017. Current long term sales agreements with major customers, a
well-established cost-competitive manufacturing footprint and strong market position put the
business in the best possible position to defend market share and leverage opportunities.
The Angolan beverage can market recovered strongly in the first six months, with record sales
achieved in a number of months. All customer volumes were significantly higher although the
low crude oil price and high inflation remain key risks in the country. The conversion of the
tinplate line to aluminium is still awaiting government allocation of foreign currency,
utilising cash on hand in Angola. The provisional targeted commissioning date, should foreign
currency become available, is in the second half of 2018. In the medium term, the market is
expected to benefit from investments already made by new customers in additional can filling
line capacity. Once the tinplate line is converted, it is expected that total installed capacity
will increase to around 2 billion cans per annum.
The continued slowdown in Nigerian discretionary consumer spending, in line with macroeconomic
challenges, impacted overall beverage can demand. As a result, Bevcan Nigeria's volumes were
down 12% on previous year's performance as the consumer remained under pressure amid negative
economic growth and a high inflation environment. Both revenue and trading profit were down on
the previous year. Post 30 March 2017, Bevcan Nigeria secured a three year sales contract
extension with a key customer. The substitution of beverage cans with other packs remains a key
risk and is being monitored closely while market growth is expected to remain sluggish in the
short term due to high inflation and subdued demand.
In South Africa, DivFood has made significant progress in the implementation of its business
improvement project which includes the replacement of old and outdated machines as well as cost
reduction initiatives. However, the division's revenue and trading profit were below that of 2016,
due to lower volumes in a number of product categories. Monobloc aerosols, polish cans, paint cans
and exports into various emerging markets were below prior year volumes. Fish can sales were
disappointing following a much lower allowable catch quota for 2017. Cash fixed costs were lower
due to cost management measures implemented during the period. Continued efficiency improvements
are expected to enhance competitiveness and deliver business benefit in 2017.
The general metal packaging businesses in the Rest of Africa delivered better revenue and trading
profit than the prior year. The Nigerian operation reported improved sales volumes on the back of
import substitution of retail products and increased demand for locally manufactured packaging.
Kenya's metal business, however, was impacted by subdued demand in the agricultural sector due
to poor rains and harvests, as well as the move to in-house manufacture by its key customer.
Market development and business rationalisation initiatives are being implemented to recoup the
lost volumes and improve business profitability.
Plastics
Revenue and trading profit were adversely impacted by disappointing results from Plastics Europe
and the Zimbabwe divisions, resulting from lower sales volumes that overshadowed continued
improvement in operations, cost savings and product diversification. Revenue and trading profit
were down 17% and 56%, respectively.
Plastics South Africa's revenue was 3% higher than last year whilst volumes were lower driven by
sluggish second quarter sales. Although liquid packaging and closures volumes were up on the
previous year in the first quarter, driven by the recovery in demand in the regions affected by
the drought in 2016, second quarter volumes were disappointing due to lower demand. Improved drum
volumes were recorded due to a recovery in bulk alcohol sales to the Rest of Africa, as well as
improved conical and crate volumes. In the short term, the South African plastics business will
focus on cost and organisational consolidation.
Plastics Europe continued to be under pressure, with volumes down on the prior year due to vertical
integration by major customers. Revenue declined by 33% while trading profit and margins reduced
significantly as a result of margin sacrifice to regain market share, as well as cost increases
related to a new investment in Ireland. The average ZAR/GBP rate for the period at R16.83 from
R22.13 in 2016 affected results. The business continues evaluating projects aimed at improving
operational performance and capturing opportunities outside the milk industry to grow volumes.
Key management changes were made during the period and good progress was made in operational
performance improvement.
The Zimbabwe plastics division's performance was down on 2016 due to a weakness in demand
experienced by both CMB and Megapak divisions on the back of macroeconomic challenges. The
inconsistent availability of foreign exchange impacted the operations' performance and consumer
demand. In both divisions, alternative sales markets are being explored and cost management
measures implemented to minimise the impact of the slowdown. The continued shortage of USD liquidity
in the Zimbabwean economy remains a concern.
Paper
The paper segment consists of the paper and board operations in the Rest of Africa. Revenue and
trading profit for 2017 were down compared to 2016, due to lower volumes from the majority of the
businesses on the back of challenging macroeconomic conditions. A solid performance by Hunyani in
Zimbabwe boosted results. Trading margins at 8.2% were significantly down from the 11.4% achieved
in prior year mainly due to the poor performance of the Zambian business that was impacted
negatively by lower volumes in sorghum beer cartons and local currency devaluation.
Nigeria Cartons' revenue and trading profit were below prior year due to generally lower demand
across all market segments resulting mainly from the impact of limited foreign exchange availability
on the general economy. Performance is expected to improve in the remainder of the year with
improved demand anticipated. Import restrictions are anticipated to continue encouraging the local
sourcing of packaged retail goods which will benefit demand. Liquidity issues and currency
volatility remain a concern.
In Zimbabwe, Hunyani revenue and trading were up significantly on the back of good tobacco carton
sales and improved operating efficiencies. Import duties on various packaging formats have stimulated
demand for locally manufactured packaging. Benefits from cost containment initiatives also contributed
to a good performance in the year.
In Zambia, sorghum beer carton sales volumes were significantly down due to lower demand. The
volatility of the Zambian kwacha against hard currencies also impacted trading profit negatively.
Malawi's results, despite a late surge in orders for tobacco cases, were down as a result of lower
sorghum beer carton sales.
Kenya Bullpak's revenue was below the previous year due to subdued demand and the vertical
integration of some customers.
Glass
Glass revenue at R663 million was marginally up on 2016 due mainly to good market share in wine.
This was overshadowed by disappointing sales volumes in all other product categories reflective of
overall subdued market demand in the South African container glass market. As a result both trading
profit and margin were below expectation. Following a successful operational turnaround, the glass
factory is running at satisfactory production efficiencies with further operational improvement
initiatives underway. Performance in the second half of the year is expected to improve due to
anticipated volume growth.
Corporate Services
Group corporate services include group research and development services, treasury services and
other corporate activity costs. Reduced property rental recoveries were offset by foreign exchange
gains due to the strengthening of the ZAR/USD exchange rate from September 2016 and cost savings
at the corporate center.
Geographical update
Revenue Trading profit* Trading margin (%)
R million 2017 2016 2017 2016 2017 2016
South Africa 5 616 5 459 500 466 8.9 8.5
Rest of Africa 2 933 2 805 610 462 20.8 16.5
Europe 782 1 158 (39) 35 (5.0) 3.0
Corporate Services - - 37 26 - -
Total 9 331 9 422 1 108 989 11.9 10.5
* Operating profit before abnormal items.
South Africa
During the six months to 31 March 2017, South Africa, like most emerging markets experienced
volatile exchange rates, slow growth rates and lower consumer demand, on the back of low
commodity prices and political uncertainty. In spite of these conditions, revenue and trading
profit increased by 3% and 7% respectively. A good performance by Bevcan and an improved
performance from liquid packaging (Plastics SA) contributed positively to performance. The
region contributed 45% to group trading profit (2016: 47%).
Rest of Africa
The Rest of Africa recorded sales of R2.9 billion, up 5% while trading profit rose by 32%.
The trading results were adversely impacted by a strong average ZAR/USD exchange rate used to
translate the results. During the period, key market GDP growth rate estimates were revised
downwards and inflation remained high. With the oil price at current levels, Nigeria and Angola
continued to experience foreign exchange shortages. Bevcan Angola recorded a particularly strong
performance on volume recovery, while Nigeria general metal packaging and paper packaging in
Zimbabwe performed well due to import replacement. The Rest of Africa now contributes 55% to
trading profit, up from 47% in 2016. Nampak's strategy remains focused on its overall investment
rationale in key markets where consumption of, in particular, packaged beer and carbonated soft
drinks is driven by sustainable demographic trends.
Europe
The UK economy continues to demonstrate slow GDP growth while the dairy market faces intense
pricing and industry pressures. The division recorded a trading loss of R39 million compared
to a trading profit of R35 million in the prior period, which reflects the poor performance
of the recently commissioned plant in Ireland.
Update on capital expenditure
As part of the group's cash conservation measures, capital expenditure (including replacement
and expansion projects) for 2017 is expected at between R0.9 - R1.1 billion, with some 60% being
replacement or sustenance capital, and the balance being expansion capital. Maintenance expenditure
is not compromised by cutbacks on capital expenditure, as this forms part of the operational
expenditure. Total capital expenditure for the period amounted to R470 million compared to
R921 million spent during the same period in 2016. R242 million was spent on expansion projects,
with R228 million spent on replacement projects. Further capital expenditure for the remainder
of the year will be prudently evaluated and will be limited to key projects.
Growth projects
Nampak continues to be circumspect regarding further capital investment in view of prevailing
macroeconomic conditions. Notwithstanding this, opportunities in a variety of substrates are
being evaluated taking into account market conditions and the prospects of improvement in
the availability of foreign exchange.
Special project: Reducing post-retirement medical aid liability
During 2016, Nampak offered continuation members who received a monthly medical scheme contribution
subsidy the option of converting the monthly subsidy into an annuity secured in the pensioner's
own name. A total of 684 of continuation members accepted this offer. The total settlements
paid to continuation members during the current financial year is R562 million, of which R406
million was accrued at 30 September 2016. R436 million was funded from the R1.744 billion raised
from the sale and leaseback transaction in September 2016, and the balance of R126 million was
funded from cash generated in the period.
Active portfolio management
In line with the strategic imperative of growth through acquisitions, the group subscribed for
a 74% interest in Nampak DivFood Botswana ("NDB") for a nominal consideration, effective
2 February 2017. The Botswana Development Corporation ("BDC"), the holder of the remaining
interest in this entity, transferred plant and equipment to the value of R37 million to this
entity on its incorporation, resulting in a consolidated gain on acquisition of R27 million.
As part of this transaction, BDC has a put option to sell its 26% interest in NDB to the group
at the end of a period of five years from the effective date of acquisition. This option was
valued at R17 million and is presented on the statement of financial position as part of
"other non-current liabilities".
Nampak Plastics Europe disposed of its in-plant operations at two United Kingdom sites, on
termination of the respective contracts. Plant, equipment and net working capital with a
carrying value of R26 million were disposed of for a net consideration of R56 million resulting
in a profit on disposal of these operations of R30 million.
Outlook
It is expected that consumers in key trading markets will remain under pressure for the rest
of the year with a concomitant negative impact on sales volumes. However, gains from improved
factory efficiencies, business improvement initiatives as well as cost savings are expected to
reduce this negative impact.
The group's operations in the Rest of Africa are expected to continue generating cash as demand
for some products grows, supported by import replacement, with overall performance being impacted
by macroeconomic challenges. The limited availability of foreign exchange and possible currency
devaluations in Nigeria and Angola may result in potential foreign currency translation impacts.
In the absence of a catalyst to promote economic growth and, consequently, consumer spending in
key markets, demand for packaged goods and exchange rates are expected to remain a key factor
influencing results.
In markets where Nampak operates, capital investments, strong customer relationships, recently
signed long term customer contracts, and a well- established footprint with in-depth knowledge
of local market dynamics will sustain its competitive advantage.
Ordinary dividend
Despite a significantly improved group balance sheet the Nampak Limited Board has decided not
to declare an interim dividend. The decision was made in light of the overall performance of
the group in the current challenging trading conditions and given the continued volatile and
uncertain macroeconomic environment, capital expenditure requirements and the availability of
foreign exchange for repatriation from restricted areas. This prudent approach will further
strengthen the group's balance sheet and improving the group's resilience during uncertain
economic times.
On behalf of the board
TT Mboweni AM de Ruyter GR Fullerton
Chairman Chief executive officer Chief financial officer
30 May 2017
Condensed group statement of comprehensive income
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar Change 30 Sep
R million Notes 2017 2016 % 2016
Revenue 9 331.3 9 422.2 (1) 19 138.9
Operating profit 3 1 132.3 870.1 30 2 162.8
Finance costs (243.6) (256.8) (527.5)
Finance income 46.1 17.8 42.0
Share of net (loss)/
profit from associates
and joint ventures (2.3) 2.7 0.1
Profit before tax 932.5 633.8 47 1 677.4
Income tax expense (79.3) (27.6) (199.1)
Profit for the period 853.2 606.2 41 1 478.3
Other comprehensive
(expense)/income, net
of tax
Items that may be
reclassified subsequently
to profit or loss
Exchange differences on
translation of foreign
operations 11 (138.8) 297.7 (509.4)
(Loss)/gain on cash flow
hedges (0.7) 111.9 (34.3)
Items that will not be
reclassified to profit or
loss
Net actuarial loss from
retirement benefit
obligations - - (491.0)
Other comprehensive
(expense)/income for the
period, net of tax (139.5) 409.6 (>100) (1 034.7)
Total comprehensive 713.7 1 015.8 (30) 443.6
income for the period
Profit/(loss)
attributable to:
Owners of Nampak Ltd 773.4 664.2 16 1 610.4
Non-controlling interest
in subsidiaries 79.8 (58.0) (132.1)
853.2 606.2 41 1 478.3
Total comprehensive income/
(expense) attributable to:
Owners of Nampak Ltd 641.6 1 047.4 (39) 572.6
Non-controlling interest
in subsidiaries 72.1 (31.6) (129.0)
713.7 1 015.8 (30) 443.6
Basic earnings per share
(cents) 120.8 105.0 15 254.5
Diluted basic earnings
per share (cents) 120.4 104.7 15 253.9
Headline earnings per
share (cents) 113.1 105.2 8 107.6
Diluted headline earnings
per share (cents) 112.8 104.9 8 107.3
Condensed group statement of financial position
Unaudited Unaudited Audited
R million 31 Mar 2017 31 Mar 2016 30 Sep 2016
Assets
Non-current assets
Property, plant and equipment
and investment property 10 471.3 11 807.4 10 573.4
Goodwill and other intangible
assets 3 979.3 4 299.2 4 043.4
Joint ventures, associates and
other investments 25.3 34.8 27.7
Deferred tax assets 57.3 152.2 70.6
Other non-current assets 65.5 43.9 56.4
14 598.7 16 337.5 14 771.5
Current assets
Inventories 3 572.9 3 827.1 3 376.7
Trade receivables and other
current assets 3 016.1 3 276.4 3 109.0
Tax assets 194.6 9.4 11.2
Bank balances, deposits and cash
equivalents 3 476.3 2 398.2 2 835.4
10 259.9 9 511.1 9 332.3
Assets classified as held for sale - 21.4 -
Total assets 24 858.6 25 870.0 24 103.8
EQUITY AND LIABILITIES
Capital and reserves
Share capital 35.4 35.3 35.4
Capital reserves (112.3) 32.0 (121.4)
Other reserves (98.0) 1 444.3 51.0
Retained earnings 10 011.9 8 166.0 9 238.5
Shareholders' equity 9 837.0 9 677.6 9 203.5
Non-controlling interest 322.6 338.4 241.0
Total equity 10 159.6 10 016.0 9 444.5
Non-current liabilities
Loans and borrowings 6 080.2 5 462.5 6 202.1
Retirement benefit obligation 1 602.5 1 996.5 1 855.7
Deferred tax liabilities 423.1 274.8 230.1
Other non-current liabilities 53.4 55.9 37.0
8 159.2 7 789.7 8 324.9
Current liabilities
Trade payables, provisions and
other current liabilities 3 797.3 3 681.3 4 937.7
Bank overdrafts 2 348.6 3 424.6 993.4
Loans and borrowings 338.3 938.4 329.4
Tax liabilities 55.6 20.0 73.9
6 539.8 8 064.3 6 334.4
Total equity and liabilities 24 858.6 25 870.0 24 103.8
Condensed group statement of cash flows
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million Notes 2017 2016 2016
Cash generated from operations
before working capital changes 1 435.5 1 370.9 2 103.0
Working capital changes (911.5) (488.3) 561.3
Cash generated from operations 524.0 882.6 2 664.3
Net interest paid (198.2) (236.4) (521.4)
Income tax paid (75.1) (166.8) (201.3)
Replacement capital expenditure (227.8) (273.5) (475.7)
Cash flows from operations 22.9 205.9 1 465.9
Dividends paid - (572.4) (575.5)
Net cash generated from/
(utilised in) operating
activities 22.9 (366.5) 890.4
Expansion capital expenditure (241.9) (647.7) (951.7)
Net proceeds from sale and
leaseback transaction - - 1 701.1
Net proceeds on disposal of
business 4.2 56.5 - -
Post-retirement medical aid
buy-out 4.3 (562.3) - -
Other investing activities 20.3 146.7 142.0
Net cash (utilised)/generated
before financing activities (704.5) (867.5) 1 781.8
Net cash raised from financing
activities 11.7 1 885.9 2 380.7
Net (decrease)/increase in cash
and cash equivalents (692.8) 1 018.4 4 162.5
Net cash and cash equivalents/
(overdraft) at beginning of period 1 842.0 (2 084.9) (2 084.9)
Translation of cash in foreign
subsidiaries (21.5) 40.1 (235.6)
Net cash and cash
equivalents/(overdraft) at
end of period 6 1 127.7 (1 026.4) 1 842.0
Condensed group statement of changes in equity
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million Notes 2017 2016 2016
Opening balance 9 444.5 9 172.4 9 172.4
Net shares issued during the
period 11.7 28.4 28.9
Share-based payment expense 9.1 9.1 13.9
Share grants exercised (11.7) (28.4) (28.8)
Shares repurchased and cancelled - (0.8) (0.8)
Share of movement in associate's
and joint venture's non-
distributable reserve - - 0.9
Release of share of non-
distributable reserve of joint
venture disposed - (0.6) -
Treasury shares disposed - 387.0 384.2
Acquisition of business 4.1 (7.7) - -
Total comprehensive income for
the period 713.7 1 015.8 443.6
Dividends paid - (566.9) (569.8)
Closing balance 10 159.6 10 016.0 9 444.5
Comprising:
Share capital 35.4 35.3 35.4
Capital reserves (112.3) 32.0 (121.4)
Share premium 262.4 250.3 250.7
Treasury shares (557.9) (399.7) (557.9)
Share-based payments reserve 183.2 181.4 185.8
Other reserves (98.0) 1 444.3 51.0
Foreign currency translation
reserve 1 363.8 2 289.1 1 494.9
Financial instruments hedging
reserve 18.1 165.0 18.8
Recognised actuarial losses (1 466.6) (975.6) (1 466.6)
Share of non-distributable
reserves in associates and joint
ventures 3.7 3.9 3.7
Available-for-sale financial
assets revaluation reserve - (38.3) -
Other (17.0) 0.2 0.2
Retained earnings 10 011.9 8 166.0 9 238.5
Shareholders' equity 9 837.0 9 677.6 9 203.5
Non-controlling interest 322.6 338.4 241.0
Total equity 10 159.6 10 016.0 9 444.5
Notes
1. Basis of preparation
The condensed interim financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for interim reports, and the
requirements of the Companies Act of South Africa applicable to condensed financial
statements. The Listings Requirements require interim reports to be prepared in
accordance with and contain the information required by IAS 34 Interim Financial
Reporting, as well as the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and the Financial Pronouncements as issued by the Financial Reporting
Standards Council.
The interim financial statements have been prepared under the supervision of the chief
financial officer, G Fullerton CA(SA).
2. Accounting policies
The accounting policies adopted and methods of computation used are consistent with
those applied for the group?s 2016 annual financial statements.
3. Included in operating profit are:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2017 2016 2016
Depreciation 413.2 423.4 863.1
Amortisation 21.8 24.3 48.6
Net translation loss recognised
on financial instruments 19.1 95.2 655.2
Net loss arising from Angolan and
Nigerian illiquidity 4.5 113.8 681.0
Net loss/(gain) arising from
normal operating activities 14.6 (18.6) (25.8)
Reconciliation of operating
profit and trading profit
Operating profit 1 132.3 870.1 2 162.8
Net abnormal (gain)/loss* (24.0) 119.2 (257.7)
Retrenchment and restructuring
costs 20.2 1.5 34.1
Net impairment losses on plant,
equipment, intangible assets,
investments and shareholder loans 10.2 16.0 360.4
Net (profit)/loss on disposal of
business and investments (30.1) 1.0 (3.5)
Gain on acquisition of business (27.0) - -
Profit on disposal of property
subject to sale and leaseback - - (1 318.9)
Net profit on disposal of other
property (1.8) (14.1) (15.2)
Devaluation loss arising from
Angolan and Nigerian illiquidity 4.5 113.8 681.0
Business acquisition-related costs - 1.0 4.4
Trading profit 1 108.3 989.3 1 905.1
* Abnormal (gains)/losses are defined as (gains)/losses 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.
4. Corporate activity
4.1 DivFood Botswana
The group acquired a 74% interest in DivFood Botswana ("DB") for strategic purposes
effective 2 February 2017 on its incorporation for a nominal consideration. The
Botswana Development Corporation ("BDC"), being the holder of the remaining interest
in this entity, transferred plant and equipment to the value of R36.5 million to this
entity on its incorporation resulting in a consolidated gain on acquistion of
R27.0 million.
As part of this transaction, BDC has a put option to sell its 26% interest in DB to
the group at the end of a period of five years from the effective date of acquisition.
This option has been valued at R17.2 million and is presented on the statement of
financial position as part of "other non-current liabilities".
4.2 Operations located at customers
The group disposed of its operations at two sites in the United Kingdom of a customer
of Nampak Plastics Europe, on termination of the respective contracts. Plant, equipment
and net working capital with a carrying value of R26.4 million was disposed of for
a net consideration of R56.5 million resulting in a profit on disposal of these
operations of R30.1 million.
4.3 Post-retirement medical aid buy-out
During the 2016 financial year, the group offered a specific group of 1 285 continuation
members, out of the total continuation members who receive a monthly medical scheme
contribution subsidy, the option of converting the monthly subsidy into an annuity
secured in the pensioner's individual name.
A total of 684 (53%) of these continuation members accepted this offer. The total
settlements paid to these continuation members during the current financial year was
R562.3 million, of which R406.4 million was accrued at 30 September 2016.
5. Determination of headline earnings
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2017 2016 2016
Profit attributable to equity
holders of the company for the
period 773.4 664.2 1 610.4
Less: preference dividend - - (0.1)
Basic earnings 773.4 664.2 1 610.3
Adjusted for:
Net impairment losses on plant,
equipment, intangible assets and
investments 10.2 16.0 360.8
Net profit on disposal of
business and investments (30.1) - (3.5)
Gain on acquisition of business (27.0) - -
Profit on disposal of property - - (1 318.9)
subject to sale and leaseback
Net (profit)/loss on disposal
of other property, plant, equipment
and intangible assets (2.5) (15.0) 6.8
Tax effects and non-controlling
interests 0.2 (0.1) 25.4
Headline earnings for the period 724.2 665.1 680.9
6. Cash and cash equivalents/(net overdraft)
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2017 2016 2016
Bank balances, deposits and cash
equivalents* 3 476.3 2 398.2 2 835.4
Bank overdrafts (2 348.6) (3 424.6) (993.4)
1 127.7 (1 026.4) 1 842.0
* Cash equivalents include US dollar indexed Angolan kwanza bonds of
R1 106.8 million (March 2016: nil; September 2016: R617.4 million).
7. Carrying amount of financial instruments
The carrying amounts of financial instruments as presented on the statement
of financial position are measured as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2017 2016 2016
At fair value - level 2
Financial assets
Derivative financial assets 14.1 178.0 -
Financial liabilities
Derivative financial liabilities 22.6 18.5 40.7
At cost
Financial assets
Investments 0.1 3.2 -
At amortised cost
Financial assets 6 364.5 5 364.9 5 789.7
Non-current financial assets 65.5 43.9 56.4
Trade receivables and other
current assets1 2 822.7 2 909.0 2 897.9
Bank balances, deposits and cash
equivalents 3 476.3 2 398.2 2 835.4
Assets classified as held for sale3 - 13.8 -
Financial liabilities 12 368.7 13 380.4 12 152.9
Non-current loans and borrowings 6 080.2 5 462.5 6 202.1
Trade payables and other current
liabilities2 3 601.6 3 554.9 4 628.0
Bank overdrafts and current loans 2 686.9 4 363.0 1 322.8
1 Excludes derivative financial assets (disclosed separately) and prepayments.
2 Excludes derivative financial liabilities (disclosed separately) and provisions.
3 Current portion of loan to Sancella SA (Pty) Ltd.
8. Capital expenditure, commitments and contingent liabilities
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2017 2016 2016
Capital expenditure 469.7 921.2 1 443.6
Expansion 241.9 647.7 951.7
Replacement 227.8 273.5 475.7
Intangibles - - 16.2
Capital commitments 250.2 768.5 454.4
Contracted 171.3 407.3 276.3
Approved not contracted 78.9 361.2 178.1
Lease commitments (including sale
and leaseback transaction) 3 545.1 120.0 3 759.5
Land and buildings 3 515.4 108.1 3 732.2
Other 29.7 11.9 27.3
Contingent liabilities 6.0 8.5 83.6
Customer claims and guarantees 6.0 8.5 6.7
Tax contingent liabilities - - 76.9
9. Share statistics
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2017 2016 2016
Ordinary shares in issue (000) 689 404 688 650 688 668
Ordinary shares in issue -
net of treasury shares (000) 640 620 638 923 639 884
Weighted average number of ordinary
shares on which basic earnings and
headline earnings per share are
based (000) 640 496 632 361 632 667
Weighted average number of ordinary
shares on which diluted basic
earnings and diluted headline
earnings per share are based (000) 642 164 634 218 634 335
10. Key ratios and exchange rates
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2017 2016 2016
10.1 Key ratios
EBITDA* 1 577.5 1 333.8 3 434.9
Net gearing (%) 51 74 49
Current ratio 1.6 1.2 1.5
Acid test ratio 1.0 0.7 0.9
Net debt: EBITDA (debt covenants) 1.7 times 2.7 times 1.7 times
EBITDA: Interest cover (debt
covenants) 7.8 times 5.9 times 5.4 times
Return on equity (%) 15.9 15.9 17.9
Return on net assets (%) 12.0 11.2 11.2
Net worth per ordinary share
(cents)** 1 536 1 515 1 438
Tangible net worth per ordinary
share (cents)** 914 842 806
* EBITDA is calculated before net impairments.
** Calculated on ordinary shares in issue - net of treasury shares.
10.2 Exchange rates
Key currency conversion rates used
for the periods concerned were
as follows:
Rand/UK pound
Average 16.83 22.13 21.07
Closing 16.83 21.15 17.80
Rand/Euro
Average 14.54 16.53 16.43
Closing 14.29 16.72 15.42
Rand/US dollar
Average 13.57 15.04 14.79
Closing 13.41 14.69 13.72
Naira/US dollar
Average 311.69 198.91 229.60
Closing 314.29 199.05 315.00
Kwanza/US dollar
Average 171.73 151.73 161.57
Closing 171.73 166.32 171.72
11. Translation reserve movement
Due to the strengthening of the rand, a translation loss of R138.8 million
(2016: R297.7 million gain) was realised for the period.
The closing exchange rates at 31 March 2017 for the rand against the UK
pound and US dollar respectively were 16.83 (September 2016: 17.80) and
13.41 (September 2016: 13.72).
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.
Administration
Independent non-executive directors
TT Mboweni (Chairman), RC Andersen, E Ikazoboh, RJ Khoza, J John, NV Lila,
PM Madi, IN Mkhari, PM Surgey.
Executive directors
AM de Ruyter (Chief executive officer), GR Fullerton (Chief financial officer),
FV Tshiqi (Group human resources director).
Secretary
NP O'Brien
Registered office
Nampak House, 20 Georgian Crescent East, Bryanston, Sandton, 2191,
South Africa
(PO Box 69983, Sandton, 2021, South Africa) Telephone +27 11 719 6300
Share registrar
Computershare Investor Services (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
Website http://www.nampak.com
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 U.S. 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: 30/05/2017 02:20:00 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
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