Nampak suffers loss in first 6 months, plans reduction in salaries, headcount in 12-month rightsizing

SOUTH AFRICA – JSE-listed packaging group Nampak has swung into an interim loss of more than five times its R455 million (US$23.57m) market value, hit by massive writedowns as well as currency devaluation losses in Angola and Nigeria.

The company reported a loss of R2.45 billion (US$126.90m) for its half-year to end-March, from profit of R321 million (US$16.63m) previously, with operating profit – before writedowns – crashing 62% to R259 million (US$13.42m).

Net finance costs climbed 77% to R494 million (US$25.59m) for the group, whose shares have crashed by about three quarters over the past year.

Despite the dire results, flagged via trading updates, the company’s shares lifted over 9%, although they are still down almost a third in the year to date.

Nampak has been battling under the weight of an unsustainable debt pile that climbed 23% to a net R5.9 billion (US$310.73m) by the end of March.

It has been struggling to convince shareholders to back a highly dilutive rights issue of a maximum of R1 billion (US$51.80m), and while it has successfully renegotiated its debt terms with lenders, shareholders must approve the rights issue by the end of July. Should this not occur, Nampak will face a step up in interest rates.

The group’s operating profit meanwhile was hit by significant foreign exchange losses in Nigeria (R531 million) and Angola (R40 million).

It also saw writedowns to goodwill to its BevCan Nigeria business of R1.5 billion (US$77.70m), in part due to softening consumer demand amid a shortage of bank notes, while about half of the impairment was related to calculations of the measure of risk to capital in the country, which has been downgraded by rating agencies.

The company also reported writedowns of R900 million (US$ 46.62 m) for assets in Angola and South Africa.

Phil Roux, interim CEO said: “Our group is a formidable business that is faced with unsustainable debt levels.

“Our strategic imperative is to focus on a new business model, that aims to unlock value in the short to medium term with a glide path that is configured to be fit for growth.

“A rigorous cost reduction program, business remodeling and significant reduction in net working capital will be fundamental to our efforts in the short term.”

The company has also revealed plans to reduce headcount by rightsizing the organization to ensure it retains the appropriate competency.

The headcount reduction will not be done all at once nor in a reckless manner, said Roux during a presentation of the company’s results for the six months to March 31.

The company will also merge its Bevcan and Divfood businesses and will consolidate its head office and standardize its financial and administrative processes and systems across the group.

Additionally, Nampak is actively managing a sustained maintenance program in the business to ensure the operating capacity of the business is not compromised and that assets are well looked after and maintained, said Nampak CFO Glenn Fullerton.

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