Nampak to prioritise cost management, stock turnover

Nampak Zimbabwe says cost containment stock turnover remains a top priority for the company in order to improve profitability across all the businesses.

The company, in its nine-month period to June 30, 2023, believes the operating environment will remain uncertain with inflation and liquidity crunch remaining key issues that will impact performance.

“Our ability to continue sourcing key raw materials on the back of global supply chain constraints, will be a key driver in sustaining the current operational performance.

“The Group will continue to focus on cost containment measures in order to improve profitability,” said managing director John Van Gend.

He said the period under review was characterised by ongoing currency volatility, resulting in inflationary pressures being felt across all the market segments. Van Gend said the liquidity crunch in the market continued to affect trading, resulting in more domestic transactions occurring in foreign currency.

Zimbabwe legalised the use of foreign currencies in domestic transactions in 2020, less than a year after abandoning dollarisation.

Economists estimate that 80 percent of transactions in the economy are now being done in US dollars and bank loans are also reflecting same.

According to the managing director, the group benefited from improved USD collections in the quarter on the back of constrained Zimbabwe dollar liquidity, most of which was deployed into working capital to meet customer demand.

“The group remains profitable despite the inflationary pressures pushing up the cost base,” said van Gend.

He said the company’s net working capital increased in part due to an increase in debtors. The
Group cash balances were $24,6 billion at the end of the third quarter, mostly due to export receipts that came at the close of the period.

“Most of this balance will be applied toward stock replenishment and the settlement of trade payables,” said van Gend.

He said although the third quarter volumes were marginally up compared to the prior year period, the gain was weighed down by lower volumes at Megapak, which continued to be affected by the increasing frequency of power cuts at the Ruwa plant.

However, the company is aiming to increase capacity through strategic acquisitions, the expansion of its product portfolio and investments in cutting-edge technologies.

The company manufactures and markets packaging products, which include paper, plastic, and metal packaging, and it also has interests in leasing biological assets and a timber processing plant.

Nampak, during the period under review, invested $2,8 billion, which relates mainly to Netstal injection moulders, chillers, and generators for Megapak.

“Various projects are under active consideration and may be pursued subject to the availability of foreign exchange,” said the managing director.

However, by leveraging its strong brand reputation and extensive distribution network, Nampak Zimbabwe is well-positioned to introduce innovative products that align with these industry trends.

The group’s revenue for the nine months to June, at $413,2 billion, grew by 41 percent in inflation-adjusted terms compared to the prior year period, while revenue in historical terms for the same period, at $117,2 billion, was 671 percent above the prior year period.

“Marginal volume improvements and inflationary pricing were the major contributors to the revenue growth,” said van Gend.

In terms of segmental performance, sales volumes at Hunyani Corrugated Division for the third quarter were 5 percent up on the prior-year period. Sales volumes into the tobacco market were 12 percent ahead of the same period last year due to an improved tobacco crop.

The managing director noted that although demand for commercial carton volumes remains firm, volumes were 12 percent down on the prior year period due to constrained raw material supplies.

“The Cartons, Labels and Sacks Division sales volumes for the third quarter were 7 percent up on the prior year due to improved demand for tobacco paper wrap. Other commercial packaging was in line with the prior-year volumes for the third quarter,” said van Gend.

In the plastics and metals segment, at Mega Pak, third-quarter sales volumes were down by 7 percent compared to the prior-year period.

“Despite firm demand from our customers, rolling power cuts negatively impacted the operation’s ability to meet customer demand,” the company said, indicating that additional generator capacity has been installed to mitigate the impact of the power cuts.

At CarnaudMetalbox, sales volumes in the third quarter were 9 percent above the same period last year, and plastics led the recovery, buoyed by higher HDPE bottle volumes, which were 36 percent above the prior year period.

However, metals volumes were 17 percent down on the prior year, while closures were 4 percent down on the same period last year.

In the forestry segment, horticultural development at the Maganga Estate near Macheke is progressing well, and it is expected that optimum use of the estate will become a reality in the near future.

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