Packaging giant Nampak on Thursday announced the sale of its paper business to Ethos Private Equity on behalf of the Ethos Fund IV.
The R1.575 billion cash transaction includes Nampak’s corrugated, sacks and tissue divisions, but excludes its shareholding in Sancella and its recycling business.
Nampak said in a statement it plans to utilise the proceeds of the transaction for its expansion plans in the rest of Africa.
This announcement at 14h07 and the announcement at 14h59 of a 14% increase in headline earnings per share for the year ending September 30 did little to support the share price. It started its slide early in the morning and ended the day 4.73% lower at R41.30.
Revenue for FY2014 increased by 10% to almost R20 billion and a final dividend per share of 107c (+9%) was declared.
Nampak CEO Andre de Ruyter said the group had a strong year and made good progress with unlocking value fromt its base business and accelerating its growth in Africa.
He said notable achievements in the reporting period were the commissioning of the third glass furnace at its Roodekop plant (see gallery attached), the sale of the cartons and labels division and the conversion of the beverage can lines in Springs to aluminium.
The group also improved its B-BEEE rating to level 3.
“With the outlook for South African economic growth modest at best, Nampak is putting a strong emphasis on rigorous management of factors under its control. Already established as the packaging leader in Africa, with operations in 11 African countries beyond South Africa’s borders
contributing more than a quarter of trading profit, we continue to focus on taking advantage of Africa’s upward growth trajectory,” De Ruyter said.
During the period trading profit from the rest of Africa increased by 25% from R495 million to R616 million due primarily to the contribution of Bevcan Nigeria and the continued good performance from the Angolan beverage can operation. The group trading margin at 10.3% was marginally lower than the previous year.
The group’s net finance costs increased by 65% to R327 million. Net borrowings increased by R4.6 billion year on year following the acquisition of Bevcan Nigeria and the capital expenditure invested in various projects during the year.
Trading conditions were difficult in South Africa and the trading margin decreased by to 6.7% maily due to margin pressure experienced in the paper, flexibles and plastics divisions coupled with a negative glass performance resulting from production constraints and higher overhead costs incurred during the commissioning and ramp-up of the third furnace.
Bevcan and DivFood benefitted from volume growth and good cost control. Lower selling prices agreed by the metals and glass divisions to secure long-term supply contracts also had an impact, De Ruyter said.
Production in the metals and rigid plastics division was impacted by the month long Numsa strike, but the company managed to keep its customers supplied. It did declare force majeur a few days for before the strike ended.
The demand for Bevcan’s 440ml beverage can increased, especially in the alcohol segment, but this was offset by lower selling prices agreed to as part of long-term supply contracts.
Nampak’s DivFood division produced improved results in 2014, benefiting from stronger performances in the vegetable and fish canning as well as in the aluminium aerosol markets. These outweighed the negative impact of emerging competition in the fruit canning sector, De Ruyter said.
Nampak glass made an operating loss for the year as production was impacted by the late commissioning of the third glass furnace. Demand in the division is expected to remain flat, but operations efficiencies will be gained for the third furnace.
Nampak liquid plastics was negatively impacted by a rise in raw material costs, but the group’s market share in extended-shelf-life milk and sorghum cartons is growing.
The business environment in South Africa is expected to remain challenging, but De Ruyter says Nampak is well-placed in the rest of Africa. “We are pursuing our strategic objective to accelerate growth in the rest of Africa to ensure that this contributes to sustainable earnings in the longer term.”