Nampak revenue in Q1 rises 809% but margins remain under pressure

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HARARE – Nampak revenue increased 809% in the first quarter to December aided by anflation-induced price increases as volumes declined across the group’s operating segments.

In a trading update, the group said while volumes were down across all sectors, there had been good demand across the product portfolio. Hunyani volumes were down 38% on the prior year period, weighed down by the tobacco sector, which was 47% down.

“Late orders were received for the 2018 tobacco growing season, which boosted the early sales in the 2019 financial year comparative,” said Nampak.

Volumes in the commercial segment were 14% below the prior year due to imported raw material sourcing challenges and reduced consumer spending.

At Mega Pak volumes declined 31% in line with the contraction in the beer beverage sector although there had been some recovery in the cordials sector. “The sourcing of raw material remains challenging in the segment.”

Volumes at CarnaudMetalbox were 35% down mainly affected by low HPDE sales after the migration to cheaper alternatives in the dairy sector. Metals was affected by the shortage of tinplate. However demand for scud containers and enclosures improved during the period.

Overall, the group said gross margins have come under pressure as the business seeks to remain competitive. The unavailability of sufficient foreign currency to import raw materials remains the paramount concern particularly for corrugated boxes for the commercial and tobacco sectors.

The group issued a profit warning as performance will reflect a difference in excess of 20%.

Nampal spent $1.2 million in capex mainly on projects carried forward from the prior financial year. Capital expenditure programmes remain curtailed due to the lack of foreign exchange required to fund projects.

High consumer confidence and economic growth bode well for packaging across the board. However, an uptick in inflation and falling aggregate demand might tax any advances and such companies as Nampak will continue to be under pressure.

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