Nampak Zimbabwe’s turnover for the first quarter is 3 percent ahead of budget but 11 percent below last year while all units are trading profitably. Managing director John Paton Mr Van Gend told the AGM yesterday, that turnover was below last year mainly due to an exceptionally good quarter last year because of the higher temperatures in November and December in 2015.
“The higher temperatures in 2015 drove up demand for beverages. However, the first quarter has almost been the opposite, with the rain and cooler temperatures.”
The group’s units were trading profitably while treasury and cash flow management remains a key focus area. Mr Van Gend said the group was currently evaluating capex projects with a value of a little over $4 million.
On operations, the group had done a review of its structures in October last year and had implemented the first phase which will see a significant reduction in operating costs going forward.
Hunyani had started the year strong against both budget and prior year particularly in the corrugated section.
“We received some late season export orders for tobacco boxes, which helped lift demand.”
Mr Van Gend also said SI64 of 2016 had helped encourage more local users of the group’s products and this was being reflected in improved commercial carton sales.
“Going forward we are cautious of the effects of the heavy rains on this season’s tobacco crop, and as a consequence, the demand for tobacco boxes. We are also facing pricing pressures from local customers.”
The cartons and labels and flexible businesses had shown improved performance following on from the restructuring. However, volumes were not as buoyant but there had been improved profitability. There had also been improved performance at Softex, where they hold a 50 percent stake.
Megapak had a slow start to the financial year with volumes lagging behind prior year. Mr Van Gend said this was in the main due to the reduced off-take in performs, mainly by Delta, as the lack of disposable income was now being felt.
The blow moulding sections were running on reduced volumes but there had been an improvement in the large injection moulding section.
“The capital expansion into 1881 closures undertaken last year is starting to yield improved capacity and performance in closure sections of the business. We are in the process of obtaining Coke approval for this closure, and once we receive this, volumes will improve further.”
At CMB, both turnover and volumes were running behind the same period last year mainly as a result of weakened sales of both HDPE bottles and closures, driven by the poor economic fundamentals.”
Demand for crowns remains subdued but the group was starting to see improvements in the demand for food cans. “Going forward, we believe this could help to offset the reduced performance in other sections of the business.”
Overall, Mr Van Gend said the group was not immune to the challenges the economy as a whole was experiencing and already signs were there that 2017 will be a tough year.
“Nampak is not immune to these issues and we have seen in recent trading updates for Delta, the magnitude of the problems being faced.” He said central to these challenges was the delay in paying foreign creditors, and this in turn was starting to impact on raw material cover.
“We have sufficient stock in the short term but unless we start to see an improvement in the ability to pay for imported raw materials we will face a situation in the coming months where we have certain lines or customers that we will fail to supply. We are also building up a large external liability that will have to be paid at some stage.”
Mr Van Gend said parent company Nampak continues to be supportive in terms of credit lines “but realistically they will have to draw a line in the sand at some point. “So overall, the business is not in bad shape but 2017 will be a tough year.” At the AGM, directors fees were approved at $31 290 and auditors fees at $145 000. — Wires.