- Revenue: ZAR6.2 billion, up 7% from ZAR5.8 billion.
- Operating Profit Before Net Impairments: ZAR1 billion, up 328% from ZAR235 million.
- Operating Margin: 11.6%, or 16.3% including post-retirement medical aid gain, compared to 4.1% last year.
- Net Finance Costs: ZAR459 million, down 7%.
- Profit for the Period: ZAR395 million, a positive swing of almost ZAR1.3 billion.
- Headline Profit: ZAR447 million compared to a headline loss of ZAR327 million.
- Net Debt: Down ZAR1.3 billion to ZAR4.6 billion.
- Cash Generated from Operations: ZAR905 million, up 53% from ZAR591 million.
- Free Cash Flow: ZAR810 million, a significant turnaround from an outflow of ZAR109 million.
- Metals Group Revenue: Up 6%, trading profit up 108%, and operating profit before net impairments up 134% to ZAR679 million.
- DivFood Turnaround: ZAR200 million swing in profitability, generating ZAR139 million in operating profit.
- Bevcan South Africa Profitability: Up 62%.
- Cost Savings: ZAR159 million in cost savings at the center.
- Post-Retirement Medical Aid Gain: ZAR290 million, reducing liability by 42%.
- Impairments: Decreased from ZAR793 million to ZAR13 million.
- Assets Held for Sale: ZAR2.2 billion worth of assets, with associated liabilities of ZAR442 million.
- Loss from Discontinued Operations: ZAR530 million, 98% represented by non-cash flow items.
- Working Capital Management: Consumed only ZAR27 million compared to ZAR570 million in the previous period.
- Available Liquidity: ZAR1.7 billion, exceeding the ZAR650 million minimum required.
- Metals Business Contribution: ZAR706 million in operating profit, up 149% for revenue of ZAR5.3 billion.
- Debt Reduction Profile: Expected to drop to approximately ZAR2.9 billion from asset disposals.
- Capital Expenditure: Approximately ZAR350 million to ZAR400 million per annum.
Release Date: June 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nampak Ltd (JSE:NPK, Financial) reported a 7% increase in group revenue to ZAR6.2 billion, with significant contributions from metals, plastics, and paper.
- Operating profit before net impairments surged by 328% to ZAR1 billion, reflecting strong cost management and efficiency improvements.
- The DivFood segment achieved a ZAR200 million swing in profitability, generating ZAR139 million in operating profit.
- Bevcan South Africa saw a 62% increase in profitability due to cost-saving initiatives and improved customer and product mix.
- Cash generated from operations increased by 53% to ZAR905 million, demonstrating effective working capital management.
Negative Points
- Nampak Ltd (JSE:NPK) faced a significant cyberattack, which was invasive and resource-intensive, causing delays in reporting.
- The business environment remains challenging, with constrained consumer spending in South Africa and economic volatility in other regions.
- Nigeria experienced a 29% volume loss due to a weak economy and a 40% currency devaluation, negatively impacting financial results.
- Unreliable municipal energy supply at the Springs plant repeatedly affected service levels, though this is expected to be resolved soon.
- The company incurred a loss from discontinued operations of ZAR530 million, primarily due to non-cash flow items like goodwill and asset impairments.
Q & A Highlights
Q: Could you just say if there was any particular cost to the cyberattack, and whether it is something that is sort of completely behind you?
A: We are in for ZAR20 million as an excess. For the rest, we have no difficulty in clawing back any additional costs that the business was affected by. We also have business discontinuity cover, so it won't affect our financials going forward. (Phildon Roux, CEO)
Q: The head office cost reduction of ZAR150 million-odd. Could you talk around what that was?
A: The costs were really high, and we've thinned out a lot. But we still have an inappropriate cost base for the end-state organization. We need to knock out at least ZAR35 million of the fixed cost by the end of this financial year. (Phildon Roux, CEO)
Q: Given the good performance in Angola, how should we look at the sustainability of the revenue and demand in that region?
A: The demand patterns are linked to what happens economically and politically in the country. There are growth possibilities coming out of Angola in the short and medium term. (Phildon Roux, CEO)
Q: What are the long-term plans for Zimbabwe, and what's the latest update on the repatriation of capital?
A: Zimbabwe is a fantastic business, and it produces exceptional levels of profitability. We have appointed a credible party to work on extracting our $52 million that the government owes us. (Phildon Roux, CEO)
Q: How much has the reduced negotiating helped to improve your cash position in the period?
A: Our energy woes were created by a municipal failure. Other than that, our plants are able to function amidst load shedding to a point. (Phildon Roux, CEO)
Q: What advantage does the new Nampak have currently over its competitors at this point?
A: We are probably at a parity position. Once we've stripped out all the unnecessary costs and become far more efficient, we'll have the agility to compete with our direct competitors. (Phildon Roux, CEO)
Q: Are you comfortable with the commercial terms with key customers in geographies?
A: I've had to address some of the trading terms. There's been close scrutiny of what we prepare to accept both on the margin and the working capital side. (Phildon Roux, CEO)
Q: If you had to look out three years and think about DivFood and Bevcan SA, where would you like to see those margins?
A: If we can stay within a range somewhere between 10 and 12-ish, I'd be delighted. But we must grow with that kind of margin target and generate the cash congruent with that. (Phildon Roux, CEO)
Q: The ZAR290 million PRMA gain, is it a recurring benefit or a once-off?
A: It is included in the HEPS, and it's non-recurring. We make no apology for that. It was a very difficult decision for us as a Board. (Phildon Roux, CEO)
Q: Can you confirm my understanding that the Springs 2 line will take the wide aluminum sheet?
A: Yes, it is geared to the significant growth in demand of the 500-million growth pack format. We are in the initial phase of that. (Phildon Roux, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
