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NPK
NPK
NPK - Nampak - Audited Group Results For The Year Ended 30 September 2007
and cash distribution
NAMPAK LIMITED
Registration number 1968/008070/06
Incorporated in the Republic of South Africa
Share Code: NPK
ISIN: ZAE000071676
Audited Group Results For The Year Ended 30 September 2007
HIGHLIGHTS
- Revenue up 12%
- Trading income up 18%
- Headline earnings per share up 22%
- Cash distribution up 20%
CONDENSED GROUP INCOME STATEMENT
2007 2006
Notes Rm Rm Change
%
Revenue 17 014.4 15 261.9 11.5
Trading income before 2 1 781.0 1 508.6 18.1
abnormal items
Abnormal items 3 (159.8) 29.3
Profit from operations 1 621.2 1 537.9 5.4
Finance costs 273.0 185.4
Finance income 82.2 62.7
Income from investments 7.0 4.8
Share of profit of 4.3 -
associates
Profit before tax 1 441.7 1 420.0 1.5
Income tax expense 385.8 553.7
Profit for the year 1 055.9 866.3 21.9
Attributable to:
Equity holders of the 1 054.2 861.8 22.3
company
Minority interest 1.7 4.5
1 055.9 866.3
Basic earnings per share 181.0 148.6 21.8
(cents)
Fully diluted earnings per 172.0 144.1 19.4
share (cents)
Headline earnings per 184.6 151.2 22.1
ordinary share (cents)
Fully diluted headline 175.4 146.6 19.6
earnings per share (cents)
Cash distribution per 115.3 96.1 20.0
share (cents)
CONDENSED GROUP BALANCE SHEET
2007 2006
Notes Rm Rm
ASSETS
Non-current assets
Property, plant and 5 666.9 5 217.9
equipment and investment
property
Goodwill and other 1 079.3 1 093.3
intangible assets
Other non-current 286.9 302.5
financial assets and
associates
Deferred tax assets 9.6 9.6
7 042.7 6 623.3
Current assets
Inventories 2 356.2 2 169.2
Trade receivables and 2 921.9 3 109.3
other current assets
Tax assets 67.0 64.2
Bank balances, deposits 4 603.5 414.6
and cash
5 948.6 5 757.3
Assets classified as held 41.3 43.3
for sale
5 989.9 5 800.6
TOTAL ASSETS 13 032.6 12 423.9
EQUITY AND LIABILITIES
Capital and reserves
Capital reserves 552.3 1 076.2
Other reserves 105.1 195.4
Retained earnings 5 344.6 4 291.6
Equity attributable to 6 002.0 5 563.2
equity holders of the
company
Minority interest 47.5 40.7
Total equity 6 049.5 5 603.9
Non-current liabilities
Loans and borrowings 526.5 1 021.8
Other non-current 13.7 18.9
liabilities
Retirement benefit 565.1 721.9
obligation
Deferred tax liabilities 742.7 683.4
1 848.0 2 446.0
Current liabilities
Trade payables, provisions 2 807.2 3 027.0
and other current
liabilities
Bank overdrafts and loans 4 2 001.8 978.8
Tax liabilities 326.1 363.1
5 135.1 4 368.9
Liabilities directly - 5.1
associated with assets
classified as held for
sale
5 135.1 4 374.0
TOTAL EQUITY AND 13 032.6 12 423.9
LIABILITIES
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
2007 2006
Rm Rm
Exchange differences on (125.8) 562.0
translation of foreign
operations
Net actuarial gain/(loss) 100.6 (92.1)
from retirement benefit
obligations
Hyper-inflation capital (7.5) (2.4)
adjustment
(Loss)/gain on cash flow (10.7) 29.5
hedges
Change in fair value of (38.9) -
available-for-sale
financial assets
Net (expense)/income (82.3) 497.0
recognised directly in
equity
Transfer to plant and (16.5) -
equipment - cash flow
hedges
Transfer to income (2.4) -
statement - cash flow
hedges
Profit for the year 1 055.9 866.3
Total recognised income 954.7 1 363.3
and expense for the year
Attributable to:
Equity holders of the 957.3 1 353.5
company
Minority interest (2.6) 9.8
954.7 1 363.3
CONDENSED GROUP CASH FLOW STATEMENT
2007 2006
Rm Rm
Operating profit before working 2 459.6 2 222.9
capital changes
Working capital changes (414.3) (488.0)
Cash generated from operations 2 045.3 1 734.9
Net interest paid (202.4) (128.5)
Income from investments 7.0 4.8
Retirement benefits, contributions (86.7) (40.1)
and settlements
Income tax paid (379.3) (364.2)
Replacement capital expenditure (573.9) (299.1)
Cash retained from operations 810.0 907.8
Dividends paid (1.7) (330.6)
Cash distributions paid (577.4) (174.4)
Net cash retained from operating 230.9 402.8
activities
Net cash utilised in investing (636.6) (151.6)
activities
Net cash (utilised)/retained (405.7) 251.2
before financing activities
Net cash utilised in financing (100.1) (1 051.0)
activities
Net decrease in cash and cash (505.8) (799.8)
equivalents
Cash and cash equivalents at (505.1) 364.8
beginning of year
Translation of cash in foreign 10.9 (70.1)
subsidiaries
Cash and cash equivalents at end (1 000.0) (505.1)
of year
NOTES
2007 2006
Rm Rm
1. Basis of preparation
The condensed consolidated
financial statements have been
prepared in accordance with
International Accounting Standard
34. The accounting policies are
consistent with those used for the
group`s 2006 annual financial
statements, which were prepared in
accordance with International
Financial Reporting Standards. The
financial statements have been
prepared on the historical cost
basis except for the revaluation of
certain financial instruments.
2. Included in trading income
before abnormal items are:
Depreciation 632.3 589.9
Amortisation 69.4 68.5
3. Abnormal items
Abnormal items are defined as items
of income and expenditure which do
not arise from normal trading
activities or are of such size,
nature or incidence that their
disclosure is relevant to explain
the performance for the period.
Financial instruments fair value (83.4) 88.6
(loss)/gain
Europe strategic review costs (50.3) -
Retrenchment and restructuring (31.5) (3.1)
costs
Share-based payment expense on BEE (20.0) (21.0)
transaction
Net profit on disposal of property 20.2 71.7
Net profit on disposal of 16.8 0.7
businesses and other investments
Net impairment losses on goodwill, (6.7) (110.6)
plant and equipment
Hyper-inflation monetary adjustment (4.9) 3.0
(159.8) 29.3
4. Cash and cash equivalents
Bank overdrafts and loans (2 001.8) (978.8)
Less current portion of loans 398.3 59.9
Less bank balances, deposits and 603.5 414.6
cash
Net cash and cash equivalents - (0.8)
included in assets held for sale
(1 000.0) (505.1)
5. Supplementary information
Capital expenditure 1 298.1 781.0
- expansion 656.6 390.3
- replacement 573.9 299.1
- intangibles 67.6 91.6
Capital commitments 1 687.6 962.1
- contracted 826.1 337.0
- approved not contracted 861.5 625.1
Lease commitments 431.9 414.4
- land and buildings 380.9 367.4
- other 51.0 47.0
Contingent liabilities 686.7 756.9
- customer claims and guarantees 16.5 10.6
- tax contingent liabilities 670.2 746.3
6. Tax contingent liabilities
The South African Revenue Service ("SARS") has raised assessments against a
number of companies in the group. Discussions with SARS on these issues
are at an advanced stage and details will be communicated once they have
been concluded.
The tax contingent liabilities include R189.1 million (2006: R243.8
million) for tax, R127.6 million (2006: R128.7 million) for penalties and
R353.5 million (2006: R373.8 million) for interest.
7. Determination of headline earnings
Net profit attributable to equity holders of the 1 054.2 861.8
company for the year
Less: preference dividend (0.1) (0.1)
Basic earnings 1 054.1 861.7
Adjusted for :
Net impairment losses on goodwill, plant, 6.7 110.6
equipment and intangibles
Net profit on disposal of businesses and other (16.8) (0.7)
investments
Net profit on disposal of property, plant, (19.7) (75.0)
equipment and intangibles
Europe strategic review costs 50.3 -
Tax effects 0.6 (19.6)
Headline earnings for the year 1 075.2 877.0
8. Share statistics
Number of ordinary shares in issue (000) 655 972 653 726
Number of ordinary shares in issue - net of 583 481 581 235
treasury shares (000)
Weighted average number of ordinary shares on 582 505 579 968
which earnings per share are based (000)
Weighted average number of ordinary shares on 626 903 615 118
which diluted earnings per share are based (000)
9. Additional disclosures
Net gearing 33% 28%
Interest cover 9 times 13 times
Total liabilities: equity 115% 122%
Return on equity 18% 15%
Return on net assets 18% 19%
Net worth per ordinary share (cents)* 1 037 964
Tangible net worth per ordinary share (cents)* 852 776
* calculated on ordinary shares in issue - net of treasury shares.
10. Related party transactions
Group companies, in the ordinary course of business, entered into various
purchase and sale transactions with associates, joint ventures and other
related parties. The effect of these transactions is included in the
financial performance and results of the group. The detailed disclosure is
available for inspection at the registered office of the company.
COMMENTS
NAMPAK PROFILE
Nampak is the largest and most diversified packaging manufacturer in Africa
with extensive manufacturing operations in South Africa and a further 11
countries on the African continent. It produces packaging products from
metal, glass, paper and plastics and is a major manufacturer and marketer
of tissue products.
It is one of the leading suppliers of folding cartons to the food and
healthcare sectors in Europe and it is the major supplier of plastic
bottles to the dairy industry in the United Kingdom.
The group is actively engaged in the collection and recycling of all forms
of used packaging.
CORPORATE ACTIVITY IN 2007
The Flexpak business at Bellville in the Western Cape was sold to Transpaco
for R52.3 million effective 4 December 2006.
Effective 26 March 2007, the group exercised its call option to acquire for
R24.8 million the remaining 50% of the shares in Burcap Plastics (Pty)
Limited.
Nampak Products Limited sold 25.1% of its shareholding in Interpak Books
(Pty) Limited to a black empowerment company on 2 April 2007 for R16.3
million.
GROUP PERFORMANCE
Rm Revenue Trading income* Margin %
2007 2006 2007 2006 2007 2006
South Africa 11 466 10 501 1 329 1 129 11.6 10.8
Rest of Africa 991 892 140 108 14.1 12.1
Europe 4 887 4 157 312 272 6.4 6.5
Intersegment eliminations (330) (288)
Total 17 014 15 262 1 781 1 509 10.5 9.9
*Before abnormal items
South Africa
Strong demand for non-durable goods benefited sales of packaging and
resulted in volumes growing across virtually all product sectors. Total
volumes grew by 4% with above-average growth in a number of products such
as beverage cans, glass bottles, liquid cartons and plastic bottles for
milk and juice. In the non-packaging sector both toilet tissue and
disposable diapers enjoyed good growth.
Tinplate and aluminium prices increased substantially but the additional
cost was generally recovered. Higher oil prices resulted in frequent
increases in the price of polymer causing a lag in recovering these
increases from customers. The price of certain grades of paper and board
also increased and in some cases the additional cost had to be absorbed due
to competitive pressures.
There were also significant increases in the prices of sand and soda ash
used in the manufacture of glass bottles.
Revenue increased by 9% to R11.5 billion. Trading income increased by 18%
to R1.3 billion whilst the trading margin improved to 11.6% from 10.8% in
2006.
Rest of Africa
The businesses in Mozambique, Nigeria, Tanzania and Zambia all performed
well. The Kenyan business lost market share to imports due to currency
strength and product substitution. The cost of imported raw materials
adversely affected profitability at the Malawian operation. The results of
the Zimbabwe operations ceased to be consolidated effective 1 June 2007.
Trading income increased by 30% to R140 million and the trading margin
improved to 14.1% from 12.1% in 2006.
Europe
In Europe, the countries in which we operate continued to enjoy steady
economic growth. Selling prices, however, in some sectors of the folding
cartons market remained under pressure due to overcapacity.
The plastic milk bottle business performed well in pounds sterling albeit
at a lower level than last year due to some once-off benefits in 2006.
Results in the folding cartons business were mixed with an improvement in
Leeds being more than offset by lower margins at Hoogerheide in the
Netherlands and difficult conditions in the short-run business.
Healthcare packaging increased its market share and improved profitability.
Trading income was similar to last year in pounds but increased by 15% in
rand to R312 million due to the weaker average exchange rate. The trading
margin was virtually unchanged at 6.4%.
Group
Revenue increased by 12% to R17.0 billion as a result of good volume growth
and the recovery of higher raw material prices. Trading income increased
by 18% to R1.8 billion and the trading margin improved to 10.5% from 9.9%
in 2006.
Net financing costs increased by 56% to R191 million as a result of capital
expenditure of R1.3 billion, increased working capital associated with
higher trading activity and higher interest rates.
Cash generated from operations was R2.0 billion and with net cash outflow
of R506 million, net debt increased to R1.9 billion. Net debt to equity
ratio increased from 28% to 33%.
Taxation reduced from R554 million to R386 million with a rate decrease
from 39% to 26.8%. This reduction in tax is primarily due to a reduction
in the statutory tax rate in the U.K. from 30% to 28% resulting in a
release of deferred tax, the release of provisions in Europe following the
final assessment of the 2006 U.K. tax returns and lower effective secondary
tax on companies (STC) as the final distribution for 2006 and the interim
distribution for 2007 were declared out of share premium. The receipt of
government incentives also contributed to the lower effective rate.
Headline earnings per share increased by 22% to 184.6 cents. Excluding the
adjustment for the fair value of financial instruments, the increase was
39%.
Segmental analysis
For segmental purposes, Bevcap is now included under Plastics (Africa) and
not Metals (Africa). Comparative figures have been restated. The
restatement resulted in R227.4 million in turnover and R46.3 million in
profit from operations in 2006 being reclassified from Metals to Plastics.
Metals and Glass
Rm Revenue Trading income* Margin %
2007 2006 2007 2006 2007 2006
Africa 4 728 4 206 805 634 17.0 15.1
*Before abnormal items
Africa
Sales increased by 12% and trading income by 27% as a result of good volume
growth in beverage cans and glass bottles and a much improved performance
from the glass bottle business.
Sales volumes of beverage cans to South African customers increased by 8%
as a result of good demand for carbonated soft drinks and most other
beverages.
Food can volumes grew by 3% following good demand for canned vegetables,
meat and fruit. Sales of fish cans were in line with long-term average
volumes. Due to declining fish catches off Namibia, the Walvis Bay food
can factory was closed and the production transferred to other factories in
South Africa. Aerosol cans continued to show good growth and paint can
sales were better than expected.
Sales of glass bottles were significantly higher than last year as a result
of strong demand and improved stock availability. Manufacturing
efficiencies improved to acceptable benchmark levels.
The Kenyan operation lost volume to international competitors as a result
of a strengthening in the Kenyan shilling and product substitution. The
Nigerian operation performed well but was disrupted by fuel and power
shortages. The Tanzanian operation had a good year as did Zambia which
experienced increased demand for crowns and steel drums.
Paper
Rm Revenue Trading income* Margin %
2007 2006 2007 2006 2007 2006
Africa 4 819 4 415 337 305 7.0 6.9
Europe 3 050 2 613 112 90 3.7 3.4
Total 7 869 7 028 449 395 5.7 5.6
*Before abnormal items
Africa
Revenue increased by 9% and trading income by 10% with the trading margin
remaining almost unchanged. Under-recovery of raw material and overhead
cost increases in the corrugated box market, together with higher costs of
production and a strike in the tissue business, adversely affected the
performance of this segment.
Sales of corrugated boxes which were good in the first half fell away in
the second half following a slackening in demand from the commercial
sector. Construction of the new paper mill is on schedule and within
budget and it is planned to commence production in the last quarter of
2008.
The cartons and labels business had a good year with volume growth of over
3%. There was strong demand from the fast-food sector buoyed by further
conversion from polystyrene to cartons. Product substitution in the
packaging of powdered detergents will result in lower sales of folding
cartons in 2008.
There was continued firm demand for cement paper sacks but sales of sugar
and maize meal bags were relatively flat.
Buoyant consumer spending resulted in strong demand for toilet tissue and
disposable diapers.
The Nigerian folding cartons operation continued to perform well, whilst
the business in Malawi was adversely affected by the cost of imported raw
materials.
Europe
Performance at the Leeds folding cartons factory in the United Kingdom
continued to improve, however margins came under pressure at Hoogerheide.
The short-run business, which supplies mainly retail packaging, did not
perform satisfactorily.
The healthcare packaging business grew volumes and market share and
improved its performance.
Plastics
Rm Revenue Trading income* Margin %
2007 2006 2007 2006 2007 2006
Africa 2 910 2 781 247 241 8.5 8.7
Europe 1 556 1 291 157 154 10.1 11.9
Total 4 466 4 072 404 395 9.0 9.7
*Before abnormal items
Africa
Revenue was up by 5% to R2.9 billion and trading income up by 2% to R247
million. Frequent polymer price increases caused a lag in recovering the
additional raw material costs and resulted in margin erosion.
Sales of PET bottles continued to grow following strong demand for
carbonated soft drinks and juices. Demand for high density plastic bottles
for milk and juice improved whilst sales of cartons for sorghum beer, juice
and milk all achieved good growth. Plastic beverage closures grew but
market share was lost which will impact on the year ahead.
Market share was regained in the toothpaste-tube market and plastic tubs
continued to show good growth. Some market share was lost in plastic
crates and sales of large plastic drums were affected by higher raw
material costs and lower customer-exports.
Performance of the flexible packaging business improved further in 2007
with the benefits of restructuring being realised. However, selling prices
and margins remained under pressure due to imports and excess domestic
capacity which resulted in an under-recovery of raw material price
increases. Good growth was achieved in certain niche areas and investments
were made in support of these growing markets.
Europe
Although selling prices rose in line with polymer price increases, sales
revenue in pounds was similar to last year following the renegotiation of
some supply agreements. Trading income in pounds was lower due to some
once-off benefits in the prior year.
Group services
Rm Revenue Trading income*
2007 2006 2007 2006
Africa - (9) 79 57
Europe 281 253 44 28
Total 281 244 123 85
*Before abnormal items
Group services includes head office activities, procurement, treasury and
property rentals. The improvement in trading income is mainly due to
reduced spend on professional services and an increase in rentals,
royalties and corporate fees received.
AUDITED RESULTS
The consolidated financial statements for the year have been audited by
Deloitte & Touche and their accompanying unmodified audit report, as well
as their unmodified audit report on this set of summarised financial
information, are available for inspection at the registered office of the
company. The annual report will be posted to shareholders in December.
PROSPECTS
Trading income is anticipated to increase in 2008. This will be moderated
by the loss of some folding carton business in South Africa as a result of
packaging substitution, the Zimbabwe profits that are no longer
consolidated and the possible negative impact of a stronger rand. However,
real earnings growth is expected in the year ahead.
DIRECTORATE
Mr PL Campbell retired as a non-executive director with effect from 31 May
2007.
Mrs CWN Molope was appointed a non-executive director on 1 June 2007.
ORDINARY SHARE CASH DISTRIBUTION
Notice is hereby given that cash distribution No. 4 of 82.3 cents (2006:
66.1 cents) per ordinary share in lieu of a dividend by way of a reduction
of share premium (event code CR) has been declared in respect of the year
ended 30 September 2007, payable to shareholders recorded as such in the
register at the close of business on the record date, Friday 11 January
2008, making a total distribution for the year of 115.3 cents (2006: 96.1
cents). The last day to trade to participate in the cash distribution is
Friday 4 January 2008. Shares will commence trading "ex" distribution from
Monday 7 January 2008.
The important dates pertaining to this cash distribution are as follows:
Last day to trade ordinary shares "cum" Friday 4 January 2008
distribution
Ordinary shares trade "ex" distribution Monday 7 January 2008
Record date Friday 11 January 2008
Payment date Monday 14 January 2008
Ordinary share certificates may not be dematerialised or re-materialised
between Monday 7 January 2008 and Friday 11 January 2008, both days
inclusive.
On behalf of the board
T Evans Chairman
GE Bortolan Chief executive officer
Sandton
21 November 2007
These results and a presentation to analysts and shareholders are available
on the group`s website www.nampak.com.
Non-executive directors:
T Evans* (Chairman), DA Hawton*, MM Katz*, RJ Khoza, KM Mokoape*, CWN
Molope*, ML Ndlovu*, RV Smither*, MH Visser, RA Williams*.
*Independent
Executive directors:
GE Bortolan (Chief executive officer), N Cumming, TN Jacobs (Chief
financial officer).
Secretary:
NP O`Brien.
Registered office:
Nampak Centre
114 Dennis Road
Atholl Gardens
Sandton 2196
South Africa
(PO Box 784324 Sandton 2146 South Africa)
Telephone +27 11 719 6300
Share registrar:
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
Johannesburg 2001
South Africa
(PO Box 61051 Marshalltown 2107 South Africa)
Telephone +27 11 370 5000
Sponsor:
UBS South Africa (Pty) Limited
Website: www.nampak.com
SUPPLEMENTARY
INFORMATION
Trading Margin
income before
before abnormal
abnormal items
items
Profit from Abnormal
operations items
2007 2006 2007 2006 2007 2006 2007 2006
Rm Rm Rm Rm Rm Rm % %
Segmental information
Metals and Glass
Africa 751 654 (54) 20 805 634 17.0 15.1
Paper
Africa 290 349 (47) 44 337 305 7.0 6.9
Europe 98 86 (14) (4) 112 90 3.7 3.4
Plastics
Africa 227 233 (20) (8) 247 241 8.5 8.7
Europe 155 153 (2) (1) 157 154 10.1 11.9
Group Services
Africa 60 30 (20) (27) 79 57
Europe 40 33 (3) 5 44 28
TOTAL 1 621 1 538 (160) 29 1 781 1 509 10.5 9.9
Date: 22/11/2007 08:07:16 Produced by the JSE SENS Department.
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