Nampak invests further in profitable Zim unit

A worker at Nampak's Angola plant demonstrates how a can is made. (Adiel Ismail, Fin24)
A worker at Nampak's Angola plant demonstrates how a can is made. (Adiel Ismail, Fin24)

Harare – South Africa’s largest packaging company, Nampak has invested over $2m into its Zimbabwe unit, which on Tuesday posted a $2.4m interim operating profit after benefiting from stronger demand for packaging material from the dairy, beverages and oil sectors.

Nampak has a 51% interest in Nampak Zimbabwe and – just like the other international companies in Zimbabwe – has been pumping money into its Zimbabwe unit.

The South African company has advanced long term financing to Nampak Zimbabwe and has contributed to the $2m in short term loans by shareholders in the Zimbabwe unit. SABMiller is the other major shareholder in Nampak Zimbabwe.

“The long term borrowings relate to Shareholders loans from the parent Company, Nampak International Limited with interest rates of 5.52% per annum and are unsecured.

“The short term borrowings comprise the current portion of the shareholders loan of $2m which have an interest rate of 5.52% per annum and are unsecured,” said Keith Nicholson, company secretary for Nampak Zimbabwe.

Nampak Zimbabwe also has an addition $580 000 in short term loans from a Zimbabwean finance institution. This amount is “secured by a negative pledge of assets of properties and has an average interest rate of 7.5% per annum”.

During the half year period to the end of March, Nampak Zimbabwe spent $2.7m for the purchase of plant and machinery to enhance its capacity. Headline earnings per share were at a high of 0.20 cents per share after revenue increased from $45.7m to $47.5m.

“This is a result of strong demand in the beverages, dairy and oil sectors due to the hot weather and a carry-over from the 2015 tobacco crop in 2016. However, this was offset by weaker exports and price reductions due to the weakening of regional currencies,” it said.

Nampak Zimbabwe however did not declare a dividend for the period under review and emphasised that “the economic outlook for the second half is not expected to improve” although it could “give rise to opportunities”.

Nicholson said operating profit before interest and tax at $2.4m (compared to $854 000 in 2015) had risen because of cost containment measures and the investment of $8.6m in new assets.

This had resulted in “improved productivity and efficiencies” and had reflected a margin of 3.1% compared to 0.4% in the prior comparative period.

Most companies in Zimbabwe are struggling to remain profitable and economists expect consumer spending patterns to worsen owing to reduced economic activity and biting cash shortages.

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