Nampak said yesterday it had appointed a restructuring officer to drive turnaround initiatives at the pakcaging group, and a restructuring plan had been submitted to lenders along with requests for debt extensions.
The update was not well received by the market, as the share price fell 13.7% to 82 cents yesterday afternoon, well down from R3.41c a year ago, while five years ago the share was trading above R16.
Opportune Investments chief investment officer Chris Logan said he believed the price fell because the update held “more of the same bad news for Nampak”, including big foreign exchange losses and “huge impairment losses to come”.
However, he said the appointment of a restructuring committee comprising directors put forward by a dissident shareholder group was likely to instil some confidence.
The group said a rights offer remained essential to the restructuring, and the negotiations with lenders would result in the amount of the rights issue being determined.
The struggling group indicated last year already that it would need to repay at least R1.35 billion of net debt by March 31, 2023, but some estimates put the rights issue as high as R2bn.
Michael Dorn had been appointed chief restructuring officer (CRO) after obtaining support from the group's lenders. His primary responsibility was implementing the restructuring plan.
“The past three years have been unprecedented in terms of reduced investor appetite and access to funding, resulting in substantially reduced deal flow and transaction values. The group remains confident that conditions to seek divestitures of certain divisions are improving. The CRO, the group's corporate finance team and advisers will implement a focused programme to realise value from asset disposals,” the group said.
Meanwhile, revenue grew 5% during the five months to February 28, primarily due to a 9% increase in the Metals packaging operations, partially offset by declines of 6% in Plastic and Paper.
“Pleasing revenue growth was reported in Bevcan Angola, while revenue in Bevcan South Africa grew 6%. Revenue in Bevcan Nigeria increased despite a reduction in volumes due to the recovery of higher foreign currency-related costs from customers. DivFood experienced a marginal decline in revenue,” the group said.
Operating profit before impairments decreased. Higher debt, coupled with increased interest rates, resulted in a 45% increase in net interest paid compared to the prior period.
“This contributed to a small loss after tax for the current period compared to a profit after tax in the prior period.”
Results for both Plastic and Paper operations in Zimbabwe were affected by a much weaker closing exchange rate at the end of the period and the requirement to translate all trading results at the closing rate.
Operating profit was well below trading profit due to an increase in net foreign currency losses, up from R69 million to R436m.
This was primarily due to comparably higher secondary market spot rates related to cash transfers from Nigeria and the impact of weaker exchange rates.
Plans to exit businesses in Ethiopia, Kenya, Tanzania and General Metals in Nigeria “are progressing well”, the group said.
Opportunities were being explored to sell some of these operations as going concerns, but in many instances the value would be realised through sales of assets and immoveable property.
“These divestitures have the potential to release up to R250m in cash benefits to the group,” the group said.
The South African beverage can market showed modest growth on the back of stronger demand for large can sizes.
In Angola, beverage can demand increased compared to the prior period.
In Nigeria, sales volumes continued to decline.
The weak South African economy continued to hamper demand in the Plastics operations with lower-than-expected volumes for bottles, drums and conical cartons, while demand for PurePak cartons and closures remained stable.
Demand for corrugated cartons in Zimbabwe continued to surpass expectations.
BUSINESS REPORT