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Nampak head delivers warning as profits slump

By Rory Harrington , 25-Nov-2009

Nampak announced a 60 per cent fall in profits in 2009 as its chief warned that 20 per cent of its operations must either turnaround or face being closed or sold off.

CEO Andrew Marshall made the declaration as the largest packaging manufacturer in Africa revealed that its 2009 profits tumbled to R202m from R495m in the previous year.

“The strategic review completed after I joined the group in March concluded that 80 per cent of our operations are profitable and have sustainable competitive advantages," said Marshall. “We aim to grow these businesses. The remaining 20 per cent are either loss-making or earning low returns and will be fixed, sold or closed.”

Two operations had so far been tackled with the sale of a plastic film business and a foam unit closure, said. Another sale and closure were planned.

The company also announced that trading income had fallen by 27 per cent, due to a heavy loss in its corrugated division and a 6 per cent decline in volumes. But the group said that despite these challenges trading income in many of its core businesses was “similar to last year”.

Nampak, headquartered in South Africa, has operations in 12 African states, as well as plastics and paper and plastics divisions in Europe.

Africa

In South Africa, the economic downturn had a major impact as sales volumes fell 6 per cent. The company said demand for food and beverage packaging “held up relatively well”. Demand for beverage cans dropped by 4 per cent and sales fell by 3 per cent.

Trading income in South Africa fell by around a third due to a R250m loss in the corrugated business.

In the rest of Africa, volumes grew especially in Nigeria and Zambia, although its Kenyan operations posted a loss. Trading income fell slightly from R71m to R69m, on the back of unfavourable exchange rates, said the company.

Food can volumes rose by 5 per cent thanks to strong fish and vegetable can sales. But sales of fruit and milk cans both decreased. A new beverage can plant in Angola is due to come on line late next year.

Glass bottle demand remained “good” said Nampak.

In plastics, African revenue rose by 3 per cent thanks to a fall in the cost of polymer. Plastic milk bottles volumes grew due to the introduction of a multi-layered container for long-life milk. Demand for PET juice bottles and carbonated soft drinks was stable.

Demand for metal closures for food containers was flat but there was strong demand for wine screw tops.

Flexible packaging margins improved. Overall demand fell but market share was gained thanks to the capture of large customers.

Europe

Overall European volumes declined and trading income fell from £11.5m to £7.6m due to higher imported polymer costs, the liquidation of a major customer and a loss at its Leeds folding cartons operation, said Nampak.

Sales remained steady at £346m although this was helped by a stronger Rand that was on average 5 per cent higher against the UK pound than in 2008.

In plastics, revenue slumped by 11 per cent. The effect on trading income was worse with a 42 per cent fall to £6.7m thanks to the liquidation of a major company and the closure of three dairies.