Nampak's turnaround starting to pay off as interim profit soars to R3 billion

In a striking demonstration of fiscal resilience, South Africa's metals packaging group Nampak has recorded a remarkable turnaround in its financial fortunes for the six months ending March 31.

The company reported a profit of R3 billion, a stark contrast to a loss of R135 million reported during the same period last year. This turnaround has not only bolstered its's position, but also highlighted the impact of strategic management amid a tightening consumer environment.

CEO Phildon Roux shared insights on the results, noting that earnings a share surged to 35 842.2 cents — a robust recovery from a loss of 1 123.5 cents in the first half of the previous year.

“The first half yielded a rewarding financial outcome,” Roux stated, attributing the momentum to a concentrated focus on margin management, cost containment, and efficiency enhancements. This   approach resulted in a 22% increase in trading profit alongside a 7% rise in operating profit.

The company's commitment to reducing debt was evidenced by the sale of Bevcan Nigeria, which netted R1.3bn and marked a pivotal milestone in their deleveraging strategy. This, combined with strong operating cash flow and lower interest costs, facilitated improved financial metrics despite an uptick in net working capital investments.

While the previous year’s operating profit was significantly buoyed by a R290m post-retirement medical aid (PRMA) gain, Nampak's current performance reflects the effective management of financial assets. The firm recognised a R65m pension fund surplus and a R100m interim settlement from an outstanding Covid-19 insurance claim, enhancing headline earnings although less substantially than in prior periods.

Revenue from continuing operations grew by 11% to R5.7bn, propelled by both volume growth and strategic price management. This growth was particularly noted in Beverage South Africa (up 7%), Diversified South Africa (up 14%), and Beverage Angola, which saw a stark 16% increase. However, Beverage South Africa faced challenges with the slower-than-planned expansion of its Springs Line 2, underscoring a mismatch between growing demand and available supply.

Trading profits also saw a healthy rise, climbing 22% to R764m. The better-than-expected performance was largely driven by a 49% surge in Diversified South Africa and a 33% boost in Beverage Angola. These sectors reported particularly strong revenue growth, highlighting the effectiveness of Nampak's strategies in regions facing varying economic climates.

Roux remarked on the focus placed on excellent margin management and cost control, praising the impressive performance of Diversified South Africa, which was supported by organic growth and an improved supply chain for fruit and fish cans. The earnings before interest, tax, depreciation, and amortisation (EBITDA) also saw a commendable rise of 7% to R1.1bn supporting the company’s overall financial health.

Despite the improved cash flow from operations, the outflow of working capital registered higher than usual due to escalating revenue levels. Nevertheless, management has prioritised improvements in collections, successfully offsetting some of the increased cash requirements. The impact of the initial tranche of the disputed Covid-19 insurance claim continues to assist working capital, a factor that Roux acknowledges as crucial for sustaining momentum.

As part of its ongoing commitment to financial resilience, Nampak has reduced its net debt significantly from R5.7bn to R3.9bn, a success attributed to strategic asset disposals and prudent cash management. The outlook is optimistic, with Roux confident that the local beverage market's growth potentials remain strong, outpacing supply. Strategic initiatives are already underway to expand capacity and enhance operational efficiencies.

“The outlook for the Nampak group remains promising. The continuity of our strategic and cultural interventions bodes well for sustaining performance in the future,” Roux concluded, hinting at a solid trajectory for the company as it navigates through challenges and seeks to fulfil growing market demands.

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