Package producer Nampak sees shares jump after reducing debt burden

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Nampak's trading update resulted in a shareprice surge on Thursday and Friday.
Nampak's trading update resulted in a shareprice surge on Thursday and Friday.

Nampak, the manufacturer of metal, plastic and paper packaging, shares rallied by more than 15% on Friday after saying it had reduced its US dollar debt, had renewed two substantial contracts to supply multi-national customers with beverage cans for the next three years.

The company also said in the trading statement released a day earlier that it had clinched two new significant contracts to produce beverage cans to big export companies. Recently appointed CEO Erik Smuts, who took over from André de Ruyter who is now the CEO of state-owned power producer Eskom, said the company would be putting growth its Africa growth strategy on hold following tough macroeconomic conditions such as the oil price crash and the devaluation of Angola’s Kwanza currency.

Casparus Treurnicht, an asset manager at Gryphon Asset Management said the share price surge was likely due to the positive news in the trading update.

In addition to the contracts, he said it was important that Nampak had reduced its dollar denominated debt using the R1.4 billion in proceeds from the disposal of its glass business as well as the $16 million (just over R265 million in today’s exchange rate) from it’s the sale of its Cartons Nigeria business. Nampak sold the glass business to Isanti Glass earlier this year.

“There was talk about Nampak going bankrupt and maybe going for massive rights issues and such at such a low share price, that’s going to be highly dilutive,” said Treurnicht.

Although Nampak’s current share price is far from the R44 it enjoyed five years ago, it was on the right path to slowly recovering but “time will tell”, how it would fare.

In late afternoon trade on Friday, Nampak shares were trading 7.4% higher at R1.45.

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