Wrap Text
Summarised consolidated financial results for the year ended
30 September 2017
Nampak Limited
(Registration number 1968/008070/06)
(Incorporated in the Republic of South Africa)
Share code: NPK
ISIN: ZAE 000071676
Summarised consolidated financial results for the year ended
30 September 2017
Group revenue of R18.8bn down by 2%
Trading profit increased to R2.0bn up by 3%
HEPS increased by 15% to 123.8 cents per share
EPS decreased by 86% to 36.6 cents per share
Operating profit before sale and leaseback of properties R961m
up by 14%
Net gearing further improved to 45% from 49% � financial position
remains strong
Cash generated from operations before working capital changes
R2.4bn up by 6%
Capital expenditure down 50% to R0.7bn while maintaining equipment
integrity
No ordinary dividend declared in line with cash conservation
strategy
Achievements
Focus on safety continues to yield results:
* Bevcan Springs � 2 million incident free production hours
* Bevcan Nigeria and Angola � 1 million incident free production hours
* Safety rate improved from 0.48 to 0.41
USD127 million cash extracted from Nigeria and Angola, reducing
cash balance in Nigeria by 16% to R828 million at year-end
Nigeria cash extraction at USD79 million higher than guidance of
USD54 million to the market
89% of Angolan cash balances hedged, up from 61%
Improved carbon footprint and energy savings for the Group
* Energy consumption reduced by 4%
* Water consumption declined by 13%
Nampak�s CEO, Andr� de Ruyter, commented �Our performance has been
resilient in a turbulent economic and political environment. While
our beverage can making operations achieved good results, the other
divisions faced adverse conditions in a climate of reduced demand
and tough trading conditions. Our results have also been negatively
impacted by a number of significant abnormal items. During 2017 our
focus has been on preparing ourselves � operationally and financially
� to create a solid foundation and platform for future growth.�
Commentary
Overview
Economic headwinds resulted in reduced consumer spending on food
characterised by trading down to more affordable staples, product
substitution for value and house brands as well as downsizing to
smaller pack sizes. Beverage can demand remained largely unaffected
by economic challenges in South Africa and Angola. In this
environment, Nampak focused on driving operational efficiencies
in order to increase productivity yields, improve safety and obtain
a better return on capital investments. The return on net assets
increased to 12% as a result.
Nampak�s headline earnings and headline earnings per share for
the year increased 16% and 15% to R793 million (2016: R681
million) and 123.8c (2016: 107.6c) respectively. Whilst revenue
declined by 2%, impacted by the strengthening of the rand against
the majority of foreign currencies, group trading profit rose
by 3%, as a result of the strong performance by the Metals
division in South Africa and Angola. On a constant currency
basis, revenue grew by 6% on the back of rand strengthening
10% against the US dollar during the year to an average rate
for 12 months ending 30 September 2017 of R13.38 from R14.79
in 2016.
Operations excellence and cost management were key priorities
for the group, resulting in head office costs being reduced by
R57 million. Operational efficiencies, product rationalisation
and the consolidation of lines and plants yielded additional
savings. The newly-established capital assurance committee
contained capital expenditure for the year to R735 million,
27% less than the average R1 billion envisaged, due to prudent
capital allocation.
Cash extraction improved significantly following the introduction
of the Nigerian Autonomous Foreign Exchange (�NAFEX�) market in
April 2017. USD127 million was extracted from Nigeria and Angola,
improving the extraction rate in Nigeria to 93% from 57% the prior
year and reducing the cash balance from R1 billion to R0.8 billion.
Hedging in Angola also increased to 89% from 61%.
Good progress was made in our safety performance with the lost time
injury frequency rate (�LTIFR�) improving to a tolerance level of
0.41 and this remains a key focus area. It is an important part of
our vision to deliver strategically and profitably, while ensuring
that all employees return home safely to their families each and
every day.
Glass traded reasonably well in the first half despite some margin
pressures, but lost this momentum in the second half, impacted also
by ongoing variable and irregular electricity supply from March to
August. The newly installed high pressure gas supply pipeline
provided significant savings in energy costs. A focused strategy
for the glass operation is in place to address production
challenges. We have freed up dedicated executive management�s
time to focus exclusively on Glass and introduced a steering
committee to actively manage the turnaround process. We are
recruiting international resources to bolster our glass-making
skills, have appointed specialist glass consultants to assist
with management processes and made key management changes. We
expect the assistance of operational specialists and a high-level
management intervention to result in improvements in operational
efficiencies.
Key management changes were introduced at Plastics Europe and steady
progress is being made in improving operational performance and
diversifying the customer base.
The 2017 EPS results have been adversely affected by certain abnormal
items, with the greatest impact coming from the absence of a once-off
capital profit of R1.3 billion made in 2016 on the sale and leaseback
of properties in South Africa and increased impairments. While headline
earnings per share rose 15%, basic earnings per share therefore declined
86% as a result of these once-off items.
Financial performance
R million 2017 2016 % change
Revenue 18 822 19 139 (2)
Trading profit 1 967 1 905 3
Abnormal items excluding capital profit on
sale and leaseback of properties (1 006) (1 061) 5
Operating profit before capital profit on
sale and leaseback of properties 961 844 14
Capital profit on sale and leaseback of
properties � 1 319 (100)
Operating profit 961 2 163 (56)
Headline earnings per share (cents) 123.8 107.6 15
Basic earnings per share (cents) 36.6 254.5 (86)
Cash generated from operations before
working capital changes 2 395 2 264 6
Revenue and margins
Group revenue at R18.8 billion was 2% down while trading profit
increased by 3%. The group benefitted from a strong performance by the
Metals division attributable to stellar results from Bevcan Angola and
improved beverage can sales in the second half in South Africa. Volume
growth in the Glass division and growth in overall revenue were offset
by disappointing performance by the Plastics and Paper divisions
resulting from tough trading conditions. Revenue growth was also limited
by the strengthening of the average rand against foreign currencies
including US dollar, pound sterling and the majority of local currencies
in the Rest of Africa.
The Metals division improved trading profit by 32% to R1.7 billion
and trading margin to 15.0% (2016: 12.2%). Group trading margin,
after taking corporate costs into account, rose to 10.4% (2016: 10.0%).
Operating profit margin declined to 5.1% from 11.3%, largely due to
a once-off R1.3 billion capital profit from the sale and leaseback
transaction included in prior year results, as well as other
abnormal items.
Abnormal items
The following abnormal items influenced the 2017 performance:
* A once-off capital profit in 2016 of R1.3 billion on the sale and
leaseback transaction contributed 208.3 cents to EPS but is excluded
from HEPS.
* Extensive impairment testing on the carrying value of Group assets
resulted in some necessary impairments:
- R321 million of goodwill for Glass was impaired as the carrying value
of the assets exceeded their value in use. The remaining carrying value
of the Glass intangible asset relating to customer relationships
amounting to R114 million was impaired. The consideration for goodwill
and customer relationships was paid to Wiegand Glass in 2012 as part
of the acquisition of the Wiegand interest in Nampak Glass. The goodwill
impairment adversely impacted the effective tax rate for the Group.
- A contract in Nampak Plastics Europe has been classified as an onerous
contract with associated assets being impaired by R112 million and an
onerous lease provision and related costs of R82 million being raised.
- Vertical integration in the dairy industry in the UK led to further asset
impairments of R53 million.
* Nampak is exposed to fluctuations in exchange rates on foreign currencies
as it operates in various foreign jurisdictions. In the current year,
foreign exchange losses of R160 million (2016: R681 million) were incurred
due to the 14% devaluation of the naira compared to the closing rate of
the prior year. The NAFEX market rate is now equivalent to the Nigerian
Interbank Foreign Exchange rate and is representative of the rate at which
the group is transacting in Nigeria. There were no foreign exchange losses
in Angola compared to R174 million in the prior year. 89% of cash balances
in that country are now hedged against a kwanza devaluation compared to
61% in the prior year.
* The unstable and variable electricity supply from the grid to the Glass
division for an extensive period following a transformer failure, resulted
in production losses and was the major factor in a R79 million contribution
loss, which has been disclosed as an abnormal item. At a trading level, the
business remained profitable, and reported trading profit of R63 million,
40% less than the R105 million in the prior year.
Taxation
The Group�s effective tax rate increased from 12% to 38% as a result of forex
losses of R160 million in Nigeria, the goodwill impairment for Glass and
asset write-offs for Plastics Europe as there was no tax shield on these items.
While the group has benefited from lower tax rates outside South Africa, the
Bevcan Nigeria pioneer status expires on 31 December 2017 and the Bevcan Angola
tax holiday ends on 31 December 2018.
Net earnings
HEPS increased by 15% to 123.8c (2016: 107.6c). Basic EPS declined by 86% to
36.6c (2016: 254.5c) as a result of certain abnormal items and the absence of
the R1.3 billion profit on the sale of property in the prior year. An
increased minority share of earnings coupled with 1% increase in the weighted
average number of shares in issue impacted earnings per share.
Financial position
The Group�s financial position strengthened further in 2017 and net gearing
improved to 45% from 49% in 2016. Net debt to EBITDA (including US dollar
linked kwanza bonds) improved to 1.6 times (2016: 1.7 times) and EBITDA to
net interest was 7.2 times (2016: 5.4 times) benefitting from lower interest
costs facilitated by proceeds from the sale and leaseback transaction in 2016
which were applied to reduce South African interest bearing debt. Net finance
costs for the period as a result also reduced by 20% to R391 million from
R486 million in 2016.
Cash extraction
The Group continues to actively manage its foreign exchange exposures in
Nigeria and Angola with improved cash extraction from Nigeria and the
introduction of the NAFEX market in Nigeria in April 2017 increased the
Nigerian extraction rate to 93% (2016: 57%) of invoices presented for payment,
while Angola�s extraction rate decreased to 47% (2016: 95%). Nampak continues
to hedge its exposure to limit the impact of foreign exchange fluctuations on
cash balances. As at year end there was no hedging in Nigeria given the liquidity
provided by the NAFEX market (2016: 38%). Further US dollar linked kwanza bonds
were acquired in Angola and 89% (2016: 61%) of cash on hand was hedged. Cash
balances on hand at year end were R0.8 billion for Nigeria, R2.2 billion including
R2.0 billion US dollar linked kwanza bonds in Angola and R654 million in Zimbabwe.
Foreign exchange rate movements
Nampak is exposed to various exchange rates. The average foreign exchange
rates are determined using monthly average rates over the financial period.
Monthly average rates are in turn the aggregate of daily closing rates for each
month. Closing rates are the daily closing spot rate as at 30 September 2017.
Average and closing exchange rate movements for the year are tabled below:
Average rates Closing rates
30 Sep 30 Sep % 30 Sep 30 Sep %
2017 2016 change 2017 2016 change
ZAR/GBP 16.96 21.07 20 18.17 17.80 (2)
ZAR/EUR 14.78 16.43 10 15.98 15.42 (4)
ZAR/USD 13.38 14.79 10 13.56 13.72 1
NGN/USD 321.90 229.60 (40) 358.99 315.00 (14)
AOA/USD 171.74 161.57 (6) 171.75 171.72 �
Trading performance
Trading Trading
Revenue profit margin (%)
R million 2017 2016 2017 2016 2017 2016
Metals 11 281 10 510 1 695 1 285 15.0 12.2
Plastics 4 624 5 557 166 392 3.6 7.1
Paper 1 497 1 749 177 236 11.8 13.5
Glass 1 420 1 323 63 105 4.4 7.9
Total operations 18 822 19 139 2 101 2 018 11.2 10.5
Corporate services � � (134) (113) � �
Total Group 18 822 19 139 1 967 1 905 10.4 10.0
Group revenue declined by 2%, while trading profit grew 3% to R2.0 billion
for the year. Strong revenue growth of 7% was achieved by the Metals division
attributable to robust beverage can sales in Angola and improved volumes from
Bevcan SA. Good revenue growth was achieved by the Glass division. This strong
performance was offset by poor results from Plastics UK, challenging trading
conditions for Plastics SA and lower demand in most markets for the Paper
division. Corporate services relate to head office activities, procurement,
treasury and property management services handled on behalf of the group.
The positive effect of the R57 million savings achieved in the year at the
South African corporate head office was offset by a reduction in the post-
retirement medical aid (�PRMA�) curtailments achieved during the year when
compared to the prior year.
Operating results were negatively impacted by the strengthening of the average
rand against the majority of foreign currencies: 10% against the US dollar,
20% against the pound and 17% against the kwanza. In other areas in Africa
where Nampak operates (except for Zambia), all currencies were weaker against
the rand by more than 10%. Despite these currency headwinds and the fact that
the prior year�s trading profit benefitted from higher PRMA savings the Group�s
trading margin improved to 10.4% from 10.0%.
Metals
The Metals division performed exceptionally well, boosting group revenues and
trading margins. Robust demand in Bevcan Angola was consistent throughout the
year and the revival of demand for beverage cans in the second half further
boosted Bevcan SA. Results from the rest of the operations were subdued.
Bevcan SA experienced strong customer demand resulting in higher volumes in
the second half. Revenue was further enhanced by sales following the
commissioning of the new ends plant which increased and enabled production
to match the Group�s can making capacity. Recently installed capacity of
the 500ml can size contributed to additional volumes. Bevcan SA now has
adequate capacity for aluminium cans and is very well placed to supply
various can sizes required by the market.
Bevcan Angola had a record year due to robust beverage can demand throughout
the year and this is expected to continue. Revenue and trading profits grew
significantly and this stellar performance was only diminished by the 10%
strengthening of the average rand exchange rate against the US dollar.
Bevcan Nigeria performed satisfactorily given the restricted economic
conditions following five consecutive quarters of negative growth since
late 2015 in Nigeria and high inflation. Revenue retracted as customer
demand dropped. Trading margins remained stable as costs were well controlled
in light of lower than anticipated demand. The introduction of the NAFEX
rate has greatly contributed to easing liquidity and improved cash extraction.
The economy is starting to revive due to the increasing oil price and improved
oil production.
DivFood had a disappointing year characterised by low demand, fish can
sales significantly below last year as a result of lower allowable catch
catch, and low consumer spending in general. There was also weak demand for
diversified consumer goods cans reflective of the current state of the economy.
This continued subdued demand during the year resulted in negative revenue
growth and trading profits.
General metals packaging in Nigeria saw good revenue and trading margin growth
in local currency despite adverse economic conditions. Demand from key customers
improved as locally manufactured packaging was preferred to imported products.
As a result certain production lines are at full capacity. The impact of these
good results was moderated by the depreciation of the naira against the
US dollar.
Metals in the rest of Africa fared well and revenue grew in Tanzania driven by
a new customer and some recovery in market demand although market share was
lost in Kenya.
Plastics
The Plastics division experienced a tough year with revenue declining
17% to R4.6 billion as a result of poor performance by Plastics Europe and lower
demand in Zimbabwe. During the year unfavourable macro-economic conditions, lower
consumer spend and the entry of new competitors in South Africa dampened the
results. Lower demand by the dairy market as well as backward integration by major
customers in both Europe and South Africa also led to losses in production volume
and impacted margins negatively.
Revenue for Plastics South Africa was flat as the impact of the drought on dairy
customers led to lower demand and loss of key PET customers to backward integration
which was offset by increased sales to other customers. Despite these challenges,
marketing initiatives yielded pleasing results in improved customer service and
stimulated demand. The business was, however, burdened by higher production costs
per unit produced as a consequence of lost volumes and this led to trading margin
contraction.
Revenue dropped 20% in pound sterling for Plastics Europe, exacerbated by the 20%
strengthening of the rand against the pound sterling resulting in revenue decline
of 36%. The division saw a loss of volumes to backward integration as Nampak sold
two in-plants to a major customer in the first half. Demand from other major
customers was relatively flat and uptake by new customers was disappointing and
did not make up for lost volume. As a result margins were also heavily impacted
and the division made a loss. Key management changes have been introduced and
good progress is being made in managing overheads and improving operational
performance. In addition, a contract was classified as an onerous contract.
Associated assets were impaired and an onerous lease provision was raised.
Plastics in the Rest of Africa was characterised by increasingly tight liquidity,
an economic slowdown and depressed trading conditions in Zimbabwe, which lead to
lower demand by customers. Revenues and profits were both lower than the prior
year; while Ethiopia grew, albeit off a low base.
Paper
Revenue from the Paper segment declined 14% to R1.5 billion. Although the Hunyani
business performed well, the segment was affected by tough economic conditions
and lower than expected demand in the territories in which Nampak manufactures
this substrate, as well as the strengthening of the rand. Trading margins also
declined.
Hunyani in Zimbabwe continued to benefit from a good tobacco crop and higher
demand, as a local producer of packaging. Restrictions on imported packaging and
duties imposed assisted in stimulating local packaging demand. Revenue and the
trading margin grew, assisted by improved operational efficiencies. All other
businesses in the Rest of Africa declined.
Cartons in Nigeria performed well and revenue and trading profit grew significantly
in local currency, as a result of customers building stock and good trading demand.
This growth was, however, negated by the strength of the rand upon translation of
results, yet trading margins improved.
Carton sales in Zambia declined on lower demand by a key customer, increased
substrate substitution into plastic and sales in bulk containers. As a result this
business has been focusing on increasing its exposure to independent brewers of
sorghum beer and diversifying its customer base. Demand in Malawi fell in light
of a shift towards other packaging substrates by a key customer. This shift is
expected to reverse in the medium term as the substitution has not been well
received by consumers.
Glass
Revenue increased by 7% to R1.4 billion as a result of volume growth in the second
half. Following a strong marketing drive, Nampak�s share of the wine market
increased to 21% for the year. Volumes to breweries and other existing customers
also grew whilst food container glass demand remained low, reflective of ongoing
lower consumer spending in South Africa.
Performance was hampered by irregular electricity supply during the second half
caused by the failure of a major transformer on the electricity grid. This led to
significantly costly production disruptions. Lost contribution predominantly as
a result of electricity disruptions amounted to R79 million. Trading profit for
the division of R63 million was 40% down as a result, despite growth in revenue.
Outlook
South Africa
South Africa remains in a tough economic and trading environment with minimal
GDP growth forecast for the next twelve months. The regulatory landscape is
increasingly adding to compliance costs. In anticipation of the delayed sugar
tax legislation, Nampak is working closely with major customers to assess the
possible impact on their businesses and how this will change packaging
requirements.
Bevcan SA will continue to focus on extracting operational efficiencies. After
the successful conversions and ramp up, the aluminium lines have been achieving
acceptable productivity levels. On the back of good progress made in 2017, momentum
has been created for further operational improvements and cost reductions. In
response to the entry of a new competitor, plans have been developed to reduce the
Bevcan cost base by R50 million per annum as we rationalise our operating footprint.
DivFood is significantly exposed to consumer spend and will continue to rationalise
to its optimal structure and manage costs in response.
Plastics SA is focusing on restructuring and streamlining management structures and
has commenced with plant rationalisations. Operations in Gauteng will be centralised
in Isando and the rigids plant in Industria will be closed. This is expected to
save around R17 million per annum.
The transformation of our Glass operations is a key focus area for the next financial
period. Nampak will continue to work towards resolving production challenges with the
assistance of external experts and additional technical skills. The successful
installation and commissioning of a gas transmission line to our operations will
also contribute towards reducing energy costs. Appropriate management changes have
been made to ensure that the business receives adequate and focused senior management
attention.
Rest of Africa
Strong can demand is expected to continue in Angola and USD13 million, subject to a
kwanza US dollar swap, has been allocated to convert the existing tin plate line into
aluminium in order to meet market demand. Following capital optimisation, this is 43%
less than the initial USD23 million approved, but will still increase capacity by 80%
of the full project scope; allowing Nampak to introduce additional beverage cans into
the Angolan market, to meet growing market demand expected over the next three to five
years. The market is strong in Angola and Nampak is well positioned to retain market
share owing to its well established footprint.
Having retained 80% of AB InBev�s beverage can volumes for three years in Nigeria,
Nampak is also awaiting the results of tenders with two key customers for cans and
cartons. The Group is well positioned in this market with improved demand for food and
diversified cans expected to remain, as the economy improves and inflation eases. Costs
are well controlled and the market continues to steadily improve with liquidity restored.
While Zimbabwe is a strong performer in paper, lack of liquidity is increasingly affecting
results from other operations. Nampak is exploring means to optimise the use of cash
balances in-country while liquidity is expected to improve with the next tobacco season.
The majority of other territories in the rest of Africa are expected grow in local terms,
though political uncertainty will remain in some countries. Following the closure of the
crowns offering in Malawi, this market will be serviced regionally and Nampak will further
look at serving regional territories collectively, where feasible, in order to extract
operational efficiencies and manage costs.
Europe
The European business is in turnaround mode. New management will continue focusing on
managing overheads and driving operational efficiencies in order to return this operation
to a break-even point in 2018 and then profitability by the 2019 financial year end.
New customers are being targeted with the Group�s research and development capabilities
having been tapped into to remain at the forefront of meeting clients� light-weighting
needs, diversifying the customer base and focus on growing market share.
Dividend
No dividend was declared for the year in line with the Board decision taken in 2016 to
suspend dividends in order to improve the financial position of the company and conserve
cash.
On behalf of the board
T?T Mboweni AM de Ruyter GR Fullerton
Chairman Chief executive officer Chief financial officer
28 November 2017
Summarised consolidated statement of comprehensive income
R million Notes 2017 2016
Revenue 18 821.7 19 138.9
Operating profit 3 961.0 2 162.8
Finance costs (508.8) (527.5)
Finance income 117.7 42.0
Share of net profit from associates and
joint ventures 0.1 0.1
Profit before tax 570.0 1 677.4
Income tax expense (214.0) (199.1)
Profit for the year 356.0 1 478.3
Other comprehensive income/(expense), net of tax
Items that will not be reclassified to profit or loss
Net actuarial gain/(loss) from retirement
benefit obligations 19.5 (491.0)
Items that may be reclassified subsequently
to profit or loss
Exchange difference on translation of
foreign operations (122.1) (509.4)
Loss on cash flow hedges (14.1) (34.3)
Other comprehensive expense for the year,
net of tax (116.7) (1 034.7)
Total comprehensive income for the year 239.3 443.6
Profit/(loss) attributable to:
Owners of Nampak Ltd 234.8 1 610.4
Non-controlling interest in subsidiaries 121.2 (132.1)
356.0 1 478.3
Total comprehensive income/(expense)
attributable to:
Owners of Nampak Ltd 120.3 572.6
Non-controlling interest in subsidiaries 119.0 (129.0)
239.3 443.6
Basic earnings per share (cents) 36.6 254.5
Diluted basic earnings per share (cents) 36.5 253.9
Summarised consolidated statement of financial position
Restated
30 Sep 30 Sep
2017 2016
R million
Assets
Non-current assets
Property, plant, equipment and investment property 10 151.4 10 573.4
Goodwill and other intangible assets 3 568.8 4 043.4
Joint ventures, associates and other investments 21.8 27.7
Deferred tax assets 49.3 70.6
Liquid bonds and other loan receivables* 1 164.0 673.9
14 955.3 15 389.0
Current assets
Inventories 3 980.3 3 376.7
Trade receivables and other current assets* 3 009.9 3 101.2
Tax assets 17.3 11.2
Liquid bonds and other loan receivables � current* 882.1 7.8
Bank balances and deposits* 2 385.0 2 217.9
10 274.6 8 714.8
Total assets 25 229.9 24 103.8
Equity and liabilities
Capital and reserves
Share capital 35.5 35.4
Capital reserves (116.4) (121.4)
Other reserves (84.4) 51.0
Retained earnings 9 476.9 9 238.5
Shareholders' equity 9 311.6 9 203.5
Non-controlling interest 369.5 241.0
Total equity 9 681.1 9 444.5
Non-current liabilities
Loans and other borrowings 6 007.2 6 202.1
Retirement benefit obligation 1 558.0 1 855.7
Deferred tax liabilities 294.5 230.1
Other non-current liabilities 64.8 37.0
7 924.5 8 324.9
Current liabilities
Trade payables, provisions and other current
liabilities 4 766.0 4 937.7
Tax liabilities 82.6 73.9
Loans and other borrowings � current 221.9 329.4
Bank overdrafts 2 553.8 993.4
7 624.3 6 334.4
Total equity and liabilities 25 229.9 24 103.8
* During the year, the US dollar indexed kwanza bonds (described as �liquid bonds�)
were reclassified from cash equivalents to loan receivables after a reassessment of
their nature in terms of IAS 7: Statement of Cash flows. As a result of this
reclassification, these bonds (amounting to R617.5 million and being all non-current)
were removed from �bank balances, deposits and cash equivalents� where they had been
presented in the prior year and presented together with other non-current loan
receivables (previously described as �other non-current assets�) as �liquid bonds
and other loan receivables�. In addition, the current portion of loan receivables,
which was previously presented as part of �trade receivables and other current
assets� has now been separately presented as �liquid bonds and other loan
receivables � current� due to a portion of the liquid bonds being current at the
end of the current year.
Summarised consolidated statement of cash flows
Restated
Notes 30 Sep 30 Sep
R million 2017 2016
Cash generated from operations before
working capital changes 2 395.1 2 264.0
Working capital changes (326.8) 561.3
Cash generated from operations 2 068.3 2 825.3
Net interest paid (405.8) (521.4)
Retirement benefits, contributions and
settlements (119.1) (161.0)
Income tax paid (152.7) (201.3)
Cash flows from operations 1 390.7 1 941.6
Dividends paid (0.1) (575.5)
Net cash generated from operating
activities 1 390.6 1 366.1
Capital expenditure?1 (735.3) (1 443.6)
Replacement (377.0) (479.3)
Expansion (358.3) (964.3)
Net proceeds on the disposal of business 4.2 57.8 �
Net proceeds from sale and leaseback
transaction � 1 701.1
Post retirement medical aid buy-out 4.3 (569.2) �
Increase in liquid bonds for hedging
purposes?2 (1 336.5) (617.5)
Other investing activities 12.0 158.2
Net cash utilised in investing activities (2 571.2) (201.8)
Net cash (utilised)/generated before
financing activities (1 180.6) 1 164.3
Net cash (repaid in)/raised from
financing activities (238.4) 2 380.7
Net (decrease)/increase in cash and cash
equivalents (1 419.0) 3 545.0
Net cash and cash equivalents/(overdraft)
at beginning of year 1 224.5 (2 084.9)
Translation of cash in foreign
subsidiaries 25.7 (235.6)
Net (overdraft)/cash and cash equivalents
at end of year 7 (168.8) 1 224.5
1 Following the JSE�s proactive monitoring process, the replacement capital
expenditure cash flow has been reclassified from �cash flow from operations�
to �cash flows from investing activities� and the comparatives restated. The
result of this reclassification is an increase in cash generated from operating
activities of R475.7 million in the prior year and a decrease in cash generated
from investing activities of R475.7 million in the prior year. In addition,
capital expenditure relating to intangible assets (R16.2 million) in the prior
year has been removed from �other investing activities� and presented together
with capital expenditure relating to tangible assets being classified accordingly
as replacement expenditure (R3.6 million) and expansion expenditure (R12.6 million)
respectively.
2 As indicated on the summarised consolidated statement of financial position, US
dollar indexed Angolan kwanza bonds were reclassified from cash equivalents to
loan receivables after a reassessment of their nature in terms of IAS 7: Statement
of Cash Flows. As a result of this reclassification, the movement in these assets
is now presented as investing activities.
Summarised consolidated statement of changes in equity
R million Notes 2017 2016
Opening balance 9 444.5 9 172.4
Net shares issued during the year 11.8 28.9
Share-based payment expense 5.0 13.9
Share grants exercised (11.7) (28.8)
Share of movement in associate's and joint
venture's non-distributable reserve � 0.9
Shares repurchased and cancelled � (0.8)
Treasury shares disposed � 384.2
Acquisition of business 4.1 (7.7) �
Total comprehensive income for the year 239.3 443.6
Dividends paid (0.1) (569.8)
Closing balance 9 681.1 9 444.5
Comprising:
Share capital 35.5 35.4
Capital reserves (116.4) (121.4)
Share premium 262.4 250.7
Treasury shares (557.9) (557.9)
Share-based payments reserve 179.1 185.8
Other reserves (84.4) 51.0
Foreign currency translation reserve 1 375.0 1 494.9
Financial instruments hedging reserve 4.7 18.8
Recognised actuarial losses (1 447.1) (1 466.6)
Share of non-distributable reserves in
associates and joint ventures � 3.7
Other (17.0) 0.2
Retained earnings 9 476.9 9 238.5
Shareholders� equity 9 311.6 9 203.5
Non-controlling interest 369.5 241.0
Total equity 9 681.1 9 444.5
Notes
1. Basis of preparation
The summarised consolidated financial statements are derived from the
consolidated financial statements, approved by the directors on 28 November
2017. They are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for preliminary reports, and the requirements of the
Companies Act of South Africa applicable to summarised consolidated financial
statements. The Listings Requirements require preliminary reports to be
prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS),
the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and the Financial Pronouncements as issued by the Financial Reporting
Standards Council, and to also, as a minimum, contain the information required
by IAS 34, Interim Financial Reporting.
The consolidated financial statements and the summarised consolidated financial
statements have been prepared under the supervision of the chief financial
officer, G Fullerton CA (SA).
2. Accounting policies and restated comparatives
The accounting policies applied in the preparation of the consolidated
financial statements for 2017, from which the summarised consolidated financial
statements were derived, are in terms of IFRS and are consistent with the
accounting policies adopted and methods of computation used in the preparation
of the previous year�s consolidated financial statements except for the useful
lives applied to property, plant and equipment at several of the group�s
operations as indicated below.
Change in accounting estimate
During the year, the group reassessed the useful lives of its property, plant
and equipment as required by IAS 16. The useful lives of the assets were
extended as the adjusted useful lives reflect more appropriately the pattern
of the consumption of the future economic benefits embodied in the assets
concerned. In accordance with IAS 16: Property, Plant and Equipment, this
represents a change in an accounting estimate and is therefore applied
prospectively in terms of IAS 8: Accounting Policies, Changes in Accounting
Estimates and Errors. The impact of the change in useful lives for the year
ended 30 September 2017 is a decrease in the depreciation expense of
R52.4 million with a similar amount expected to be incurred annually in
the future.
3. Included in operating profit are:
R million 2017 2016
Depreciation 799.0 863.1
Amortisation 32.4 48.6
Reconciliation of operating profit and trading
profit1
Operating profit 961.0 2 162.8
Profit on disposal of property subject to sale and
leaseback � (1 318.9)
Operating profit � adjusted 961.0 843.9
Net abnormal losses � excluding profit on disposal
of property subject to sale and leaseback2 1 005.8 1 061.2
Net impairment losses on property, plant,
equipment, goodwill, intangible assets, investments
and shareholder loans 667.8 360.4
Devaluation loss arising from Angolan and Nigerian
exchange rate movements 160.0 681.0
Onerous contract and related losses 81.8 �
Production losses due to electrical supply and fire 79.2 �
Retrenchment and restructuring costs 73.1 34.1
Profit on disposal of other property (3.0) (15.2)
Net profit on disposal of investments and
businesses (25.4) (3.5)
Gain on acquisition of business (27.0) �
Other (0.7) 4.4
Trading profit 1 966.8 1 905.1
1 Trading profit is the main measure of profitability used for segmental
reporting purposes.
2 Abnormal losses/(gains) are defined as losses/(gains) which do not arise
from normal trading activities or are of such size, nature or incidence
that their disclosure is relevant to explain the performance for the year.
4. Corporate activity
4.1 DivFood Botswana
The group acquired a 74% interest in Nampak Divfood Botswana (Pty) Ltd
(�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 acquisition 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 Ltd, 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 R57.8 million
resulting in a profit on disposal of these operations of R31.4 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 697 (54%) of these continuation members accepted this offer. The
total settlements paid to these continuation members during the current
financial year was R569.2 million, of which R406.4 million was accrued at
30 September 2016.
R436.0 million of the total settlements paid was funded using 25% of the
gross proceeds from the sale and leaseback transaction in 2016 with the
balance of R133.2 million funded from current year cash generation.
4.4 Group Risk Holdings
The group terminated its membership in the Mutual Risk Group (MRG) with
effect from 1 September 2017 due to competitiveness in the insurance market.
Nampak Ltd disposed of its interest in Group Risk Holdings (Pty) Ltd
(the holding company of MRG) for no consideration, resulting in a loss
on disposal of R6.0 million.
5. Determination of headline earnings
R million 2017 2016
Profit attributable to equity holders of the
company for the year 234.8 1 610.4
Less: preference dividend (0.1) (0.1)
Basic earnings 234.7 1 610.3
Adjusted for:
Net impairment losses on property, plant,
equipment, goodwill, intangible assets and
investments 667.8 360.8
Net profit on disposal of investments and
businesses (25.4) (3.5)
Gain on acquisition of business (27.0) �
Profit on disposal of property subject to sale and
leaseback � (1 318.9)
Net (profit)/loss on disposal of other property,
plant, equipment and intangible assets (7.4) 6.8
Tax effects and non-controlling interests (49.9) 25.4
Headline earnings for the year 792.8 680.9
Headline earnings per share (cents) 123.8 107.6
Diluted headline earnings per share (cents) 123.4 107.3
6. Liquid bonds and other loan receivables
R million 2017 2016
Liquid bonds1 1 954.0 617.5
Equipment sales receivables2 68.7 62.3
Other loan receivables 23.4 1.9
Total liquid bonds and other loan receivables 2 046.1 681.7
Less: Amounts receivable within one year
reflected as current 882.1 7.8
Liquid bonds 867.0 �
Equipment sales receivables 10.7 7.1
Other loan receivables 4.4 0.7
Net non-current liquid bonds and other loan
receivables 1 164.0 673.9
1 Liquid bonds relate to US dollar indexed Angolan kwanza bonds. As at
30 September the Angolan kwanza equivalent of USD144.1 million (2016:
USD45.0 million) had been hedged through these bonds in order to protect
the group against further Angolan kwanza devaluation. Interest rates
charged are between 5.0% to 7.8%.
2 Equipment sales receivables are repayable from 2018 to 2025. Interest
rates charged are between 5.8% to 14.0%.
7. Net (overdraft)/cash and cash equivalents at end of year
R million 2017 2016
Bank balances and deposits 2 385.0 2 217.9
Bank overdrafts (2 553.8) (993.4)
(168.8) 1 224.5
8. Carrying amount of financial instruments
The carrying amounts of financial instruments as presented on the statement
of financial position are measured as follows:
R million 2017 2016
At fair value � level 2
Financial assets
Derivative financial assets1 19.1 �
Financial liabilities
Derivative financial liabilities1 22.6 40.7
At amortised cost
Financial assets 7 266.7 5 789.7
Non-current liquid bonds and other loan receivables 1 164.0 673.9
Trade receivables and other current assets2 2 835.6 2 890.1
Current liquid bonds and other loan receivables 882.1 7.8
Bank balances and deposits 2 385.0 2 217.9
Financial liabilities 13 166.7 12 152.9
Non-current loans and borrowings 6 007.2 6 202.1
Trade payables and other current liabilities3 4 383.8 4 628.0
Current loans and borrowings 221.9 329.4
Bank overdrafts 2 553.8 993.4
1 Derivative financial assets and liabilities consist of forward exchange
contracts and commodity futures. Their fair values are determined using
the contract exchange rate at their measurement date, with the resulting
value discounted back to the present value.
2 Excludes derivative financial assets (disclosed separately) and
prepayments.
3 Excludes derivative financial liabilities (disclosed separately) and
provisions.
9. Capital expenditure, commitments and contingent liabilities
R million 2017 2016
Capital expenditure 735.3 1 443.6
Replacement 377.0 479.3
Expansion 358.3 964.3
Capital commitments 589.9 454.4
Contracted 256.4 276.3
Approved not contracted 333.5 178.1
Lease commitments (including sale and leaseback
transaction) 3 585.5 3 759.5
Land and buildings 3 542.6 3 732.2
Other 42.9 27.3
Contingent Liabilities 6.8 83.6
Customer claims and guarantees 6.8 6.7
Tax contingent liabilities � 76.9
10. Share statistics
2017 2016
Ordinary shares in issue (000) 689 404 688 668
Ordinary shares in issue � net of treasury shares
(000) 640 620 639 884
Weighted average number of ordinary shares on
which basic earnings and headline earnings per
share are
based (000) 640 496 632 667
Weighted average number of ordinary shares on
which diluted basic earnings and diluted headline
earnings per share are based (000) 642 630 634 335
11. Key ratios and exchange rates
11.1 Key ratios
R million 2017 2016
EBITDA* 2 460.2 3 434.9
Net gearing % 45.0 49.0
Current ratio times 1.3 1.4
Current ratio (including non-current portion
of liquid bonds) times 1.5 1.5
Acid test ratio times 0.8 0.8
Acid test ratio (including non-current
portion of liquid bonds) times 1.0 0.9
Net debt: EBITDA � debt covenants times 2.3 1.9
Net debt: EBITDA � debt covenants (including
liquid bonds) times 1.6 1.7
EBITDA: Interest cover � debt covenants times 7.2 5.4
Return on equity % 2.5 17.9
Return on net assets % 12.3 11.2
Net worth per ordinary share** cents 1 454 1 438
Tangible net worth per ordinary share** cents 896 806
* EBITDA is calculated before net impairment losses.
** Calculated on ordinary shares in issue � net of treasury shares.
11.2 Exchange rates
Key currency conversion rates used for the periods concerned were as
follows:
Rand/UK pound 2017 2016
Average 16.96 21.07
Closing 18.17 17.80
Rand/Euro
Average 14.78 16.43
Closing 15.98 15.42
Rand/US dollar
Average 13.38 14.79
Closing 13.56 13.72
Naira/US dollar
Average 321.90 229.60
Closing 358.99 315.00
Kwanza/US dollar
Average 171.74 161.57
Closing 171.75 171.72
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.
13. Subsequent events
There have been no subsequent events from the reporting date up to the
date of the consolidated financial statements.
14. Independent auditor�s opinion
The auditors, Deloitte & Touche, have issued their opinion on the
consolidated financial statements for the year ended 30 September 2017,
as well as these summarised consolidated financial statements. The audit
was conducted in accordance with International Standards on Auditing. They
have issued unmodified audit opinions. These summarised consolidated
financial statements have been derived from the consolidated financial
statements and are consistent in all material respects with the consolidated
financial statements. Copies of their audit reports on the consolidated
financial statements and on these summarised financial statements, together
with the accompanying financial statements are available for inspection at
the company�s registered office. Any reference to future financial performance
included in this announcement, has not been reviewed or reported on by the
company�s auditors.
The auditor�s report does not necessarily report on all of the information
contained in this announcement. Shareholders are therefore advised that
in order to obtain a full understanding of the nature of the auditor�s
engagement they should obtain a copy of that report together with the
accompanying financial information from the issuer�s registered office.
Independent auditor�s report on summary financial statements
To the shareholders of Nampak Limited
Opinion
The summary consolidated financial statements of Nampak Limited, which
comprise the summary consolidated statement of financial position as at
30 September 2017, the summary consolidated statements of comprehensive
income, changes in equity and cash flows for the year then ended, and
related notes, are derived from the audited consolidated financial
statements of Nampak Limited for the year ended 30 September 2017.
In our opinion, the accompanying summary consolidated financial statements
are consistent, in all material respects, with the audited consolidated
financial statements of Nampak Limited, in accordance with the requirements
of the JSE Limited Listings Requirements for preliminary reports, set out in
note 1 to the summary consolidated financial statements, and the
requirements of the Companies Act of South Africa as applicable to
summary financial statements.
Summary consolidated financial statements
The summary consolidated financial statements do not contain all the
disclosures required by the International Financial Reporting Standards
and the requirements of the Companies Act of South Africa as applicable
to annual financial statements. Reading the summary consolidated financial
statements and the auditor�s report thereon, therefore, is not a substitute
for reading the audited consolidated financial statements
of Nampak Limited and the auditor�s report thereon.
The audited consolidated financial statements and our report thereon We
expressed an unmodified audit opinion on the audited consolidated financial
statements in our report dated 28 November 2017. That report also includes
the communication of other key audit matters as reported in the auditor�s
report of the audited financial statements.
Directors� responsibility for the summary consolidated financial statements
The directors are responsible for the preparation of the summary consolidated
financial statements in accordance with the requirements of the JSE Limited
Listings Requirements for preliminary reports, set out in note 1 to the summary
consolidated financial statements, and the requirements of the Companies Act
of South Africa as applicable to summary financial statements, and for such
internal control as the directors determine is necessary to enable the
preparation of the summary consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
The Listings Requirements require preliminary reports to be prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council,
and to also, as a minimum, contain the information required by IAS 34, Interim
Financial Reporting.
Auditor�s responsibility
Our responsibility is to express an opinion on whether the summary
consolidated financial statements are consistent, in all material respects,
with the consolidated audited financial statements based on our procedures,
which were conducted in accordance with International Standard on Auditing
(ISA) 810 (Revised), Engagements to Report on Summary Financial Statements.
Deloitte & Touche Registered Auditors Per: Trushar Kalan Partner
28 November 2017
Buildings 1 and 2
Deloitte Place
The Woodlands Office Park
Woodlands Drive,
Woodmead, Sandton
National executive: *LL Bam Chief Executive, *TMM Jordan Deputy Chief Executive
Officer, *MJ Jarvis Chief Operating Officer, *AF Mackie Audit & Assurance,
*N Sing Risk Advisory, *NB Kader Tax, TP Pillay Consulting, S Gwala BPS,
*K Black Clients & Industries, *JK Mazzocco Talent & Transformation,
MG Dicks Risk Independence & Legal, *TJ Brown Chairman of the Board
*Partner and Registered Auditor.
A full list of partners and directors is available on request.
B-BBEE rating: Level 1 contributor in terms of the DTI Generic Scorecard as
per the amended Codes of Good Practice
Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu 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: 28/11/2017 03:00:00 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
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