Africa sectors star for Nampak

Andre de Ruyter.

Picture: Supplied

But the packaging company saw a R681m foreign exchange loss from its Angolan and Nigerian businesses, with Nigeria contributing the bulk. This pushed headline earnings per share down 48%.

Group operating profit of R2.2bn, which was up 29%, benefited from a R1.3bn capital injection from a recent property sale and leaseback transaction.

"It’s a disappointing result as expected, due mainly to forex losses, and future losses cannot be ruled out," Mark Hodgson, an analyst at Avior Capital Markets, said on Monday. A lack of a final dividend in line with Nampak’s cash conservation strategy would see dividend cover revised down over the liquidity problems in Nigeria and Angola. These came amid foreign exchange shortages and large currency devaluations in the two markets.

But Nampak CEO Andre de Ruyter said "all in all it was a solid set of numbers". The biggest disappointment was the big foreign exchange loss.

"We have seen continued volume growth in the business," De Ruyter said. The output of paper, plastics, metals and glass packaging were all up, he said. Glass had delivered a trading profit of R105m from a restated trading loss of R81m in 2015.

Group trading profit of R1.9bn was up 4% as trading profit from the rest of Africa of R990m rose 12%, making it 52% of overall trading profit. Meanwhile, net gearing of 49% was well down from 72% in 2016.

The share lost 0.28% on the day. Brian Mugabe, an analyst at Momentum SP Reid Securities, said on Monday that Nampak’s results were in line with the trading update released a few weeks ago, and that the "bad news around the foreign exchange losses had been largely priced in".

"[The results were] operationally positive, however, as the turnaround efforts are now becoming more tangible, and with some hedging in place and devaluation in Nigeria unlikely to be as severe in financial 2017, the base effects of this year should support an improved outlook going forward," he said.

Despite the cash extraction rate in Nigeria and Angola rising to 77% from 59% in 2015, R990m, or 50% of R2bn of cash holdings in Nigeria and Angola were hedged by year-end.

Nampak had warned that headline earnings per share for the year would plunge, with much of this coming from abnormal items.

Asset impairments of R355m-R370m related mainly to the planned conversion of the Angolan tinplate beverage can line to aluminium.

Nampak entered into a sale and leaseback deal on 15 properties in SA and the outright sale of one property for R1.7bn. This sum was received in September. The book value of the net assets included in the transaction at the end of September 2015 was R382m, with a capital profit of R1.3bn on the sale. This had allowed it to deleverage its balance sheet and strengthen the group’s covenant positions.