Nampak to focus on cost management to protect margins

Nampak Zimbabwe says demand for packaging across all business units faced pressure due to intensified competitor activity, especially in the commercial segment.

Additionally, the company said it encountered supply chain disruptions with raw materials arriving late through Beira Port, due to political unrest in Mozambique.

“Although the raw materials were ultimately received, the delays impacted our delivery capabilities during the festive season,” Mr John Van Gend, the group’s managing director, said in a trading update for the first quarter ended December 31, 2024.

Mr Van Gend said the group would continue to focus on cost containment measures to protect margins and drive profitability across all operating units.

In the period under review, group revenue expressed in US dollar terms was 23 percent lower than in the prior year period while trading profit declined by 56 percent, reflecting the reduced demand across all business units.

“Notably, the gross profit margin held steady compared to the previous year, whereas the trading profit margin experienced a 9 percent drop.

“This reduction in trading margin is largely attributable to the hyperinflation accounting effects from the prior year’s comparative period.

“We have now transitioned to US dollar reporting after changing our functional currency, effective April 1, 2024,” said Mr Van Gend.

Nampak continues to trade under a cautionary notice regarding the pending disposal of Nampak Southern Africa Holdings Limited’s shareholding in the Group to TSL Limited.

During the quarter under review, at Hunyani Paper and Packaging, the corrugated products division recorded a sales volume decline of 35 percent compared to the same period last year.

Mr Van Gend said the decrease was primarily due to heightened competition within the commercial segment and a reduced carry-over of late-season orders from tobacco merchants.

The Cartons, Labels, and Sacks Division achieved a 4 percent increase in sales volumes compared to the prior year, fuelled by a recovery in commercial sales.

“Although tobacco wrap volumes outperformed the previous year’s figures, the overall growth in this area remains somewhat constrained,” he said.

In the plastics and metal segment, Mega Pak experienced a 13 percent decline in volumes compared to the same period last year.

Mr Van Gend said the intermittent power disruptions from the Zimbabwe Electricity Supply Authority (ZESA) led to increased operational costs and a rise in plant breakdowns, stemming from the resultant stop-start production process.

“This has negatively affected our efficiencies, and we have installed additional generator capacity to ensure more efficient operations going forward,” he said.

At CarnaudMetalbox, sales volumes for the first quarter were down 7 percent compared to the previous year, and the decrease is primarily due to a significant reduction in metals volumes, which have lagged behind last year’s figures as a result of raw material shipping delays.

“We expect these materials to arrive at the beginning of the next quarter.

“Additionally, plastic volumes were slightly below the prior year, but this was largely a consequence of some customers facing liquidity challenges, which temporarily affected their offtake,” said Mr Van Gend.

TSL’s Limited US$25 million offer for a 51,43 percent stake in Nampak Zimbabwe, when consummated, will also be a significant deal for the market.

Negotiations are still ongoing, but both parties have since signed binding transaction agreements, pending all necessary regulatory approvals.-herald