Financial Mail and Business Day

Nampak shares surge 13% as it reports rebound

Karl Gernetzky Markets Writer gernetzkyk@businesslive.co.za

Africa’s largest packaging group, Nampak, had its best day on the JSE in over five months on Friday, with shares jumping after the group said it had seen a major improvement in trading conditions in its third quarter ending June.

Efforts at cash preservation and strong demand meant revenue was up almost a quarter in the nine months to June, Nampak said, with its shares surging 13.36% to close at R2.80, its best day since February.

Nampak supplies packaging to the food manufacturing and dairy industry and also makes cans. It has not been immune to Covid-19 and was particularly hard hit in SA by a series of alcohol sales bans that started in March 2020.

The group has been pursuing cost-saving efforts that have included job cuts.

Nampak has said export contracts for its SA cans business mitigated softer local demand for beverage cans in its six months to end-March, when group revenue was stable at R6.5bn.

It did not go into details in its voluntary trading update on Friday, saying it expects to release more detailed information in September, but it said it had remained within lenders’ covenants during the period.

NAMPAK HAS SAID EXPORT CONTRACTS FOR ITS SA CANS BUSINESS MITIGATED SOFTER LOCAL DEMAND FOR BEVERAGE CANS

The group, valued at R1.93bn on the JSE, has been struggling with a debt pile racked up during a push into the rest of Africa.

Net debt stood at R4.3bn at the end of March. Nampak’s lenders require a R1bn reduction of interest-bearing debt by end-September through strategic asset disposals or a combination of asset disposals and a capital raise.

Nampak said in July that in light of its improved operational performance, lenders had agreed to review a need for this.

Nampak said recently it had met all milestones to date and while it had binding offers for assets amounting to R1bn at endMarch, this was reduced to R400m after the sale of an asset fell through.

Along with other SA heavyweights such as MTN that have pushed heavily into the rest of Africa, Nampak has faced issues with dollar-denominated debt, just under half of its total debt at end-March, down from threequarters in the prior year.

After Covid-19 struck, the group negotiated a relaxation of lending covenants until endSeptember 2021, though this had come with a requirement to reduce debt.

The ratio of net debt to core profit, a measure of a company’s ability to repay loans, was at 2.99 at the end of June, below a revised covenant of 4.5 times, it said on Friday.

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2021-08-02T07:00:00.0000000Z

2021-08-02T07:00:00.0000000Z

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