Nampak’s disposals boost interims

The turnaround or sale of underperforming businesses and improved performances from the flexible, diversified canning and African operations of Nampak boosted the financial results of the listed packaging giant in the six months to March.

Nampak’s stated strategy to fix, close or sell underperforming businesses resulted in the disposal of Europe cartons and health care packaging units, Interpak Books, Disaki Manufacturing, L&CP and Tubs.

The European folding cartons and health care businesses were sold effective from the end of February at a loss of R300 million.

Net finance costs decreased 61 percent in the six months to March to R47m because of lower interest rates and reduced debt following the receipt of the proceeds from the disposal of businesses.

Net debt declined to R1.2 billion from R1.7bn in September and from R3.4bn two years ago.

Net debt to equity decreased to 23 percent from 33 percent in September last year, largely because of the receipt of the proceeds of disposals that were used to repay debt, and strong operating cash flows.

Andrew Marshall, Nampak’s chief executive, said the strategy that had been in place for the past two years continued to bear fruit and it had now sold or closed most of the underperforming businesses and was focused on growing the core profitable operations.

The company had invested a further R348m during the last six months in businesses where the group had sustainable competitive advantages, he said.

However, Marshall said demand from local consumers had been moderate in the six months to February and no significant improvement was expected in the next six months.

But Marshall said the benefits of the disposal and closure of underperforming businesses and increased profits from the rest of Africa were expected to contribute to an overall improvement in the performance of the company for the full year, although at a lower rate than that achieved in the first half.

Nampak yesterday reported an almost 27 percent growth in fully diluted headline earnings a share from continuing operations to 91.1c in the six months to February from 71.9c in the previous corresponding period.

The growth in fully diluted headline earnings a share from both continuing and discontinued operations was lower at 23 percent to 94.6c.

Revenue was flat at R7.985bn compared with R7.982bn in the previous period.

Operating profit from continuing operations rose by 16 percent to R867m from R747.8m and the trading margin improved to 10.7 percent from 9.5 percent.

An interim dividend of 34c was declared, up from 25c.

Marshall said revenue was flat in South Afrixca due to the disposal of a number of smaller underperforming businesses but the rest of Africa and Europe showed pleasing growth in local currencies.

The shares fell 0.51 percent to close at R21.39 yesterday.