Nampak reports decrease in earnings

South African packaging group Nampak on Wednesday reported an 18,5% decrease in fully diluted headline earning per share to 118,4 cents for the year ended September 30 2005, from 145,3 cents a year ago.

The group declared a final dividend per share of 56,6 cents, unchanged from 2004, bringing the total dividend for the year to 83,6 cents per share.

According to an I-Net Bridge consensus forecast, Nampak was expected to report fully diluted headline earnings per share of 124 cents. The dividend was exactly in line with expectations.

Fully diluted earnings per share slipped by 18,9% to 121,6 cents from 150 cents.

Revenue dropped by 10,9% to R15,583-billion from R17,495-billion, while net profit for the year decreased by 19,2% to R781,1-million from R967,1-million previously.

Commenting on the results, Nampak said that it is better structured for sustained growth following an intense programme aimed at improving the company’s overall competitiveness.

Nampak added that while its earnings per share have not been at the desired level, the company has delivered strong cash generation, improved gearing and maintained the dividend in 2005.

The group noted that this financial period has been characterised by the rand’s continued strength, the highly competitive paper and flexibles markets, hyper-inflation in Zimbabwe and significant restructuring in South Africa and Europe.

This process has included an increased focus on core business activity, resulting in the sale of Peters Papers and Tufbag in South Africa, and the Short-Run Plastics business in the United Kingdom.

An added benefit of this disposal has been the sale of several properties, among them the Woburn Sands site in England, which was sold for £40-million.

Equally important contributors to Nampak’s strengthened positioning were the conclusion of the company’s R1-billion black economic empowerment transaction and the 50% Nampak Glass partnership with Wiegand-Glas, one of Europe’s glass manufacturers.

The Cartons & Labels investment in Nigeria will also be a key contributor to future profits in that region, and the progression of group-wide projects that will enable Nampak to leverage its capability in the market, such as ERP, have gained considerable momentum.

All the above has been part of a deliberate exercise that forms the basis of what the company’s CEO, John Bortolan, described as the “protect and grow” strategy.

Bortolan said that although there are a number of layers to the approach, getting the fundamentals in place was pivotal to moving to the next level.

He added that this embodies the work that has been done over the past few years, and specifically over the past 12 months, and which has positioned Nampak on a stronger platform for growth.

The “protect” part of the strategy aims to ensure that the company maintains its leading position in the market segments that it serves. 

This means excelling across all operational functions to ensure that divisions are performing to world-class standards.

The “grow” pillar is geared at harnessing the company’s scale, reach and core competencies to develop opportunities in new and existing markets.

Innovation, technical strength and the company’s packaging research and development facility, which is regarded as the most advanced on the continent, are also seen as potential growth drivers that must be leveraged.

While Nampak is not actively on an acquisitions trail, the company said it will continue to assess strategic opportunities on a case-by-case basis. 

In South Africa, further cost savings are envisaged due to a centrally driven procurement initiative, and an ongoing focus on cost leadership and manufacturing excellence.

The recent improvement in spending on non-durable goods is expected to continue and should benefit sales of packaging.

In the rest of Africa, Zimbabwe is expected to continue to be affected by hyper-inflation and severe currency depreciation, while the Nigerian cartons operation is budgeted to contribute significantly to future results.

In Europe, plastic bottle sales will benefit from the inclusion of two additional in-plants, and the general folding cartons business is expected to achieve an improvement in profitability.

All in all, Nampak expects an improvement in headline earnings going forward.—I-Net Bridge

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