Packaging company Nampak says it expects to see great improvement for 2016 as it reshapes its business and focuses on cost efficiencies and growth areas.
The company has been navigating volatile economic conditions, it said in a shareholder update statement posted on Thursday 17 September.
In the six months to March, the company reported group operating profit down 9 percent, despite a 16 percent gain on its top line. It attributed this to margin pressure from major customers, high labour and energy costs, plus the disappointing loss made by Nampak Glass, which put pressure on Nampak’s South African businesses.
It noted these issues offset gains made in its African businesses, which are a key strategic thrust and now account for 38 percent of group trading profit.
Nampak is currently evaluating potential glass opportunities in Angola, Nigeria and Ethiopia.
CEO André de Ruyter said the company was addressing operational difficulties at its glass and Bevcan Springs factories. “We have made solid progress on stabilising and improving the performance at glass and addressing the spoilage issue at our Bevcan Springs site.” He said these actions should translate into strong financial performance in 2016.
Nampak has also taken steps to strengthen its leadership team, including the appointment of Glenn Fullerton as CFO. It aims to re-focus its portfolio, improve operational efficiencies, tighten cost and capex controls, improve project management, and invest in operational leverage.
“This strategy is in advanced stages of implementation, the benefits of which are expected to flow through to the bottom line in 2016,” said Mr De Ruyter.
Its business in the rest of Africa, which saw trading profit gain 22 percent in the half-year, continue to operate in a challenging macroeconomic environment, it says. Nampak says contractual pass-through mechanisms are in place to protect the businesses from currency fluctuation where possible.
Nampak wants Africa to eventually account for 50 percent of its trading profit. “Despite the current significant challenges in the region caused by the decline in commodity prices, our expansion into attractive sub-Saharan African markets will continue. With the region’s economy still growing above global rates, and a growing, young and rapidly urbanising population, we along with key customer partners, continue to invest to meet rising consumer demand in these higher-margin markets,” said Mr De Ruyter.
He said Nampak will continue to expand in Africa through greenfield investment and acquisitions in metals, glass and rigid plastics and organic expansion with a strong focus on Ethiopia, Angola and Nigeria.
To aid the company’s growth, it aims to reduce transport suppliers by 92 percent, reduce complexity and build better relationships with customers.
“We are driving cultural change at Nampak to create a more supportive, collaborative and internally aligned operating company that performs as a single unit that can make better, buy better and sell better,” said Mr De Ruyter.