Nampak’s Fiscal Rollercoaster: Forex Turbulence, Resilient Profits, and Bold Restructuring Unveiled in Year-End Financial Odyssey

  • Nampak faced a 2% revenue decline, reaching R16.6 billion, attributed to volume reductions in key segments.
  • Despite this, the company managed a 2% increase in trading profit, showcasing resilience amid challenges.
By Lethabo Ntsoane

In a recent announcement, Nampak Limited, a leading company in South Africa, unveiled its audited consolidated financial results for the fiscal year ending September 30, 2023. The company reported a challenging year marked by a 2% decline in revenue, amounting to R16.6 billion, coupled with operational challenges and significant forex losses.

Turnaround Initiatives and Strategic Focus

Amidst the hurdles faced during the fiscal year, Nampak undertook a comprehensive turnaround plan, involving changes at both the board and management levels. The strategic shift included a business model review, capital and debt restructuring, a rights offer, and a renewed focus on its core Metals business. Despite macro-economic headwinds, the company successfully executed its transformation agenda, achieving significant milestones.

Financial Overview

Revenue and Profitability:

The group reported a 2% decline in revenue, attributed to volume reductions in key segments such as Bevcan Nigeria, DivFood, and Bevcan SA. Notwithstanding the revenue dip, Nampak managed to increase trading profit by 2%. However, operating profit before net impairments faced challenges, primarily due to forex losses.

Forex Challenges:

Forex losses of R1.2 billion took a toll on the company, with R1.0 billion attributable to Nigeria. The Nigerian losses were a consequence of a consistently weakening Naira in a forex market that faced scarcity issues. The Naira’s floatation in June 2023 further exacerbated the situation, causing a significant depreciation and impacting the company’s treasury function.

Impairment Impact:

Operating net profit before impairment losses declined by 76%, reflecting the challenges faced during the fiscal year. Impairment losses of R2.8 billion adversely affected profitability, leading to a 61% reduction in the group’s shareholder equity base to R1.6 billion from R4.7 billion.

Finance Costs:

Net finance costs increased by 109% to R1.2 billion, inclusive of once-off refinancing advisory costs of R335 million. Rising interest rates, coupled with higher investment in working capital and extended maturity dates on existing funding, contributed to the significant increase in interest costs.

Going Concern and Debt Refinancing

Going Concern:

Despite the challenges and a paragraph on material uncertainty relating to going concern in the auditor’s opinion, the directors, based on available information, believe that the going concern assumption is appropriate. This is attributed to financial plans, forecasts, available funding facilities, cost reduction plans, and the successful rights offer.

Debt Refinancing:

The company strengthened its capital and financing structure through a successful rights issue, raising R960 million (net of transaction costs), and the restructuring and refinancing of group banking facilities. As of September 30, 2023, the group’s current and acid test ratios improved to 1.8 times and 1.0 times, respectively, compared to the prior year.

Outlook and Conclusion

Nampak acknowledges the tough macro-economic environment ahead with sustained low growth and hard currency constraints in key markets. The company expresses commitment to strengthening its value proposition, competitor status, and continued focus on its strategic transformation agenda.

In conclusion, despite the significant challenges faced during the fiscal year, Nampak remains determined to overcome obstacles and expresses gratitude to stakeholders for their ongoing support. The full audited consolidated annual financial statements and auditor’s opinion can be accessed on the JSE website and Nampak’s website for a more in-depth understanding of the financial results.

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo