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NPK - Nampak Limited - Interim Report And Cash Distribution For The Six Months
Ended 31 March 2008
NAMPAK LIMITED
Registration number: 1968/008070/06
(Incorporated in the Republic of South Africa)
Share code: NPK
ISIN: ZAE000071676
INTERIM REPORT AND CASH DISTRIBUTION FOR THE SIX MONTHS ENDED 31 MARCH 2008
CONDENSED GROUP INCOME STATEMENT
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2008 2007 Change 2007
Notes Rm Rm % Rm
Revenue 8 874.6 8 498.4 4.4 17 014.4
Trading income 2 762.1 919.6 (17.1) 1 781.0
before abnormal
items
Abnormal items 3 61.7 (138.6) (159.8)
Profit from 823.8 781.0 5.5 1 621.2
operations
Finance costs 163.5 122.8 273.0
Finance income 49.5 30.8 82.2
Income from 5.1 3.5 7.0
investments
Share of profit 3.9 1.1 4.3
from associates
Profit before tax 718.8 693.6 3.6 1 441.7
Income tax 86.2 229.4 385.8
Profit for the 632.6 464.2 36.3 1 055.9
period
Attributable to:
Equity holders of 645.9 462.2 39.7 1 054.2
the company
Minority interest (13.3) 2.0 1.7
632.6 464.2 1 055.9
Basic earnings per 110.4 79.3 39.2 181.0
share (cents)
Fully diluted 104.1 75.9 37.1 172.0
earnings per share
(cents)
Cash distribution 28.0 33.0 (15.2) 115.3
per share (cents)
Headline earnings 109.9 87.6 25.4 184.6
per ordinary share
(cents)
Fully diluted 103.6 83.7 23.8 175.4
headline earnings
per share (cents)
CONDENSED GROUP BALANCE SHEET
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2008 2007 2007
Notes Rm Rm Rm
ASSETS
Non-current assets
Property, plant and 6 517.1 5 463.7 5 666.9
equipment and investment
property
Goodwill and other 1 139.2 1 094.8 1 079.3
intangible assets
Non-current financial 298.2 261.1 286.9
assets and associates
Deferred tax assets 6.5 3.8 9.6
7 961.0 6 823.4 7 042.7
Current assets
Inventories 2 705.9 2 456.8 2 356.2
Trade receivables and other 3 559.1 3 128.2 2 921.9
current assets
Tax assets 15.4 57.5 67.0
Bank balances, deposits and 4 738.3 547.7 603.5
cash
7 018.7 6 190.2 5 948.6
Assets classified as held 46.7 16.5 41.3
for sale
TOTAL ASSETS 15 026.4 13 030.1 13 032.6
EQUITY AND LIABILITIES
Capital and reserves
Capital reserves 114.1 724.7 552.3
Other reserves 658.6 125.7 105.1
Retained earnings 5 990.8 4 753.8 5 344.6
Equity attributable to 6 763.5 5 604.2 6 002.0
equity holders of the
company
Minority interest 42.7 40.3 47.5
Total equity 6 806.2 5 644.5 6 049.5
Non-current liabilities
Loans and borrowings 597.1 989.5 526.5
Deferred tax liabilities 668.6 678.9 742.7
Retirement benefit 618.1 709.7 565.1
obligation
Other non-current 14.7 19.6 13.7
liabilities
1 898.5 2 397.7 1 848.0
Current liabilities
Trade payables, provisions 3 007.2 2 731.1 2 807.2
and other current
liabilities
Bank overdrafts 4 2 868.6 1 912.3 1 603.5
Loans and borrowings 332.4 20.5 398.3
Tax liabilities 113.5 324.0 326.1
6 321.7 4 987.9 5 135.1
TOTAL EQUITY AND 15 026.4 13 030.1 13 032.6
LIABILITIES
CONDENSED GROUP CASH FLOW STATEMENT
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2008 2007 2007
Notes Rm Rm Rm
Operating profit before 1 135.2 1 217.1 2 372.9
working capital changes
Working capital changes (473.1) (805.4) (414.3)
Cash generated from 662.1 411.7 1 958.6
operations
Net interest paid (133.5) (92.0) (202.4)
Income from investments 5.1 3.5 7.0
Tax paid (378.5) (246.0) (379.3)
Replacement capital (313.6) (358.4) (573.9)
expenditure
Cash (utilised (158.4) (281.2) 810.0
in)/retained from
operations
Cash distributions and (480.9) (385.0) (579.1)
dividends paid
Net cash (utilised (639.3) (666.2) 230.9
in)/retained from
operating activities
Net cash utilised in (440.2) (128.1) (636.6)
investing activities
Net cash utilised before (1 079.5) (794.3) (405.7)
financing activities
Net cash utilised in (86.8) (56.6) (100.1)
financing activities
Net decrease in cash and (1 166.3) (850.9) (505.8)
cash equivalents
Cash and cash equivalents 4 (1 000.0) (505.1) (505.1)
at beginning of period
Translation of cash in 36.0 (8.6) 10.9
foreign subsidiaries
Cash and cash equivalents 4 (2 130.3) (1 364.6) (1 000.0)
at end of period
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2008 2007 2007
Rm Rm Rm
Exchange differences on translation 562.2 (58.4) (125.8)
of foreign operations
Net actuarial gains from retirement - 6.3 100.6
benefit obligation
Deferred tax adjustments on (12.0) - -
actuarial losses
Hyper-inflation capital adjustment - (7.6) (7.5)
Gains/(losses) on cash flow hedges 19.1 (12.4) (10.7)
Change in fair value of available- - - (38.9)
for-sale financial assets
Net income/(expense) recognised 569.3 (72.1) (82.3)
directly in equity
Transfer to plant and equipment - (7.3) - (16.5)
cash flow hedges
Transfer to income statement - cash - - (2.4)
flow hedges
Profit for the period 632.6 464.2 1 055.9
Total recognised income and expense 1 194.6 392.1 954.7
for the period
Attributable to:
Equity holders of the company 1 199.4 392.5 957.3
Minority interest (4.8) (0.4) (2.6)
1 194.6 392.1 954.7
NOTES
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2008 2007 Change 2007
Rm Rm % Rm
1. Basis of preparation
The condensed interim
consolidated financial
statements have been
prepared in accordance
with International
Accounting Standard (IAS)
34, Interim Financial
Reporting. The accounting
policies used are
consistent with those
used for the group's 2007
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 valuation
of certain financial
instruments.
2. Included in trading
income before abnormal
items are:
Depreciation 332.0 311.2 632.3
Amortisation 37.3 33.2 69.4
3. Abnormal items
Financial instruments 104.6 (66.9) (83.4)
fair value adjustment
Retrenchment and (26.5) (10.9) (31.5)
restructuring costs
Share-based payment (17.8) (11.0) (20.0)
expense on BEE
transaction
Net impairment 1.4 - (6.7)
gains/(losses) on plant
and equipment and
intangible assets
Europe strategic - (48.7) (50.3)
review costs
Net monetary - (2.2) (4.9)
adjustment - hyper-
inflation
Net profit on - 1.2 20.2
disposal of property
Net (loss)/profit on - (0.1) 16.8
disposal of
businesses
61.7 (138.6) (159.8)
4. Cash and cash
equivalents
Bank overdrafts (2 868.6) (1 912.3) (1 603.5)
Bank balances, 738.3 547.7 603.5
deposits and cash
(2 130.3) (1 364.6) (1 000.0)
5. Supplementary
information
Capital expenditure 771.9 619.3 1 298.1
- expansion 458.3 260.9 668.0
- replacement 313.6 358.4 630.1
Capital commitments 1 171.8 1 133.8 1 687.6
- contracted 773.7 710.6 826.1
- approved not 398.1 423.2 861.5
contracted
Lease commitments 469.6 381.8 431.9
- land and buildings 370.8 335.5 380.9
- other 98.8 46.3 51.0
Contingent 18.3 713.0 686.7
liabilities
- customer claims and 18.3 10.3 16.5
guarantees
- taxation - 702.7 670.2
6. Share statistics
Ordinary shares in 657 647 655 179 655 972
issue (000)
Ordinary shares in 585 156 582 688 583 481
issue - net of
treasury shares (000)
Weighted average 585 211 582 745 582 505
number of ordinary
shares on which
headline earnings and
basic earnings per
share are based (000)
Weighted average 631 874 624 702 626 903
number of ordinary
shares on which
diluted headline
earnings and diluted
basic earnings per
share are based (000)
7. Determination of
headline earnings
Profit attributable 645.9 462.2 1 054.2
to equity holders of
the company for the
period
Less: preference - - (0.1)
dividend
Basic earnings 645.9 462.2 39.7 1 054.1
Adjusted for:
Net impairment (1.4) - 6.7
(gains)/losses on
plant and equipment
and intangible assets
Net loss/(profit) on - 0.1 (16.8)
disposal of
businesses
Net profit on (2.7) (0.7) (19.7)
disposal of property,
plant and equipment
Europe strategic - 48.7 50.3
review costs
Tax effects 1.1 0.2 0.6
Headline earnings for 642.9 510.5 25.9 1 075.2
the period
8. Additional
disclosures
Net gearing 45% 42% 33%
Interest cover 7 times 8 times 9 times
Total 121% 131% 115%
liabilities:equity
Return on equity 19% 16% 18%
Return on net assets 15% 16% 18%
Net worth per 1 163 969 1 037
ordinary share
(cents)*
Tangible net worth 968 781 852
per ordinary share
(cents)*
*calculated on
ordinary shares in
issue - net of
treasury shares
COMMENTS
GROUP FINANCIAL REVIEW
Revenue Trading income
2008 2007 2008 2007
Rm Rm Rm Rm
South Africa 5 919 5 699 574 688
Rest of Africa 500 519 28 84
Europe 2 658 2 469 160 148
Intersegment (202) (189) - -
eliminations
Total 8 875 8 498 762 920
Group
Revenue growth of 4% was adversely affected by lower volumes in South Africa,
the under-recovery of raw material cost increases and the loss of revenue from
the Zimbabwean operations which are no longer consolidated.
Trading income decreased by 17% as a result of the above as well as a write-off
in Nigeria following the discovery of certain irregularities and under-
performance by some businesses. The trading margin declined from 10.8% to 8.6%.
Profit from operations, however, increased by 6% mainly as a result of the
positive adjustment for the fair value of financial instruments.
Net finance costs increased by 24% to R114 million due to higher interest rates,
increased capital expenditure and working capital.
Following the agreement with SARS on a number of tax issues, an amount of R250
million was paid to SARS in settlement of these issues. A provision of
approximately R350 million was on the balance sheet for the matters in dispute
and consequently R103 million was released from the provision. This, together
with a reduction in the South African company tax rate, contributed to an
effective tax rate of 12.0%.
Headline earnings per share increased by 25% from 88 cents to 110 cents.
However, normalized headline earnings per share decreased by 15.2%.
Total capital expenditure was R772 million, with the significant items being
R197 million spent on the new recycled paper mill at Rosslyn, R127 million on
the rebuild of a glass furnace and R57 million on the new beverage can line in
Angola.
Increased raw material prices as well as greater holdings of strategic stocks
resulted in a higher value of stocks. Extended payment terms to export-related
customers resulted in an increase in trade receivables. There was an overall
increase in net working capital of R473 million.
Net debt to equity increased from 33% in September 2007 to 45% in March 2008
mainly as a result of the additional tax payment, the capital expenditure
programme and the increase in working capital.
South Africa
Whilst there was growth in demand for packaging in the first quarter of the
year, this abated in the second quarter. Demand for beverage packaging was
affected by cooler weather and a shortage of carbon dioxide gas, whilst lower
catches of pilchards resulted in a reduction in food can sales. Total packaging
volumes in South Africa for the period under review declined by 2.1%.
Prices of most raw materials increased, with polymers particularly affected by
the higher oil prices. It was not possible in all cases to fully recover the
increased costs. Some market share in the paper and plastics segments was lost
as a result of competitor activity. Power interruptions caused by load shedding
also resulted in higher costs of manufacture, loss of production and, in some
cases, lost sales.
Additionally, some businesses did not perform operationally to expectations and
contributed to the 17% decrease in trading income to R574 million. The trading
margin fell from 12.1% to 9.7%.
Rest of Africa
The results from the operations in Zimbabwe are no longer consolidated and
resulted in a reduction of R28 million in trading income. Following the
discovery of certain irregularities, a loss of R25 million was incurred at the
metals operation in Nigeria. Additional controls have been implemented in this
business. The folding cartons operation in Nigeria continued to perform well.
Trading income for the region decreased from R84 million to R28 million and the
trading margin from 16.2% to 5.6%.
Europe
In pounds, sales were ahead of last year whilst trading income was at a similar
level. Both of these were assisted by a stronger Euro. The trading margin
declined marginally from 5.9% to 5.6%. The average exchange rate to the pound
was R14.40 compared to R14.07 last year.
SEGMENTAL REVIEW
Metals & Glass
Revenue Trading income Margin
2008 2007 2008 2007 2008 2007
Rm Rm Rm Rm % %
Africa 2 476 2 356 363 406 14.7 17.2
Africa
Sales increased by 5% whilst trading income decreased by 11%.
Good volume growth in beverage cans in the first quarter was offset by weaker
growth in the second quarter as a result of cooler weather and a shortage of
carbon dioxide gas. Volumes for the six months were 3% lower than for the same
period in 2007.
Food can volumes fell by 5% following a substantial drop in the sale of fish
cans as a result of poor pilchard catches. Good growth was achieved in vegetable
cans whilst sales of fruit cans were marginally lower than last year.
Demand for glass bottles continued at the high levels experienced last year and
contributed to a much improved trading performance from the Glass operation. The
rebuild of a furnace was delayed to the second half of the year.
The R25 million written-off in Nigeria contributed to the decrease in trading
income.
Paper
Revenue Trading Margin
income
2008 2007 2008 2007 2008 2007
Rm Rm Rm Rm % %
Africa 2 409 2 356 128 173 5.3 7.3
Europe 1 650 1 537 57 53 3.5 3.4
Total 4 059 3 893 185 226 4.6 5.8
Africa
Sales increased by 2% but trading income decreased by 26%.
Sales volumes of corrugated boxes decreased as a result of reduced demand in the
commercial sector where there was intense competition. In some cases, market
share was also lost as a result of pressure on selling prices.
Demand for folding cartons in South Africa was lower due to reduced exports and
the partial conversion of detergent cartons and cigarette outer packaging to
flexible packaging.
There was good demand for disposable diapers and toilet tissue which, together
with improved production efficiencies, contributed to an improvement in the
performance of the tissue business.
The folding cartons business in Nigeria continued to perform well. Sales and
trading income in Malawi were ahead of last year. Sales in Zambia are ahead of
last year although margin pressure resulted in a small reduction in trading
income.
Europe
Sales and trading income in pounds both increased by 5% to GBP115 million and
GBP3.9 million respectively.
Sales in both folding cartons and healthcare packaging were higher than last
year. Sales and trading income benefited from the strength of the Euro against
sterling.
Plastics
Revenue Trading Margin
income
2008 2007 2008 2007 2008 2007
Rm Rm Rm Rm % %
Africa 1 534 1 506 65 139 4.2 9.2
Europe 831 765 81 79 9.7 10.3
Total 2 365 2 271 146 218 6.2 9.6
Africa
Sales increased by 2% but trading income decreased by 53%.
Loss of market share in plastic beverage closures and a shortage of carbon
dioxide, affecting sales of both beverage closures and PET bottles, depressed
overall volume growth of rigid plastic containers.
The tubes and tubs business experienced good volume growth but operational
difficulties had a significant impact on the profitability of this sector.
The PET bottle business was impacted by the move to in-plant manufacture where
profits are lower.
The flexible packaging sector continued to be highly competitive and cost
increases could not be fully recovered. Volume growth in the high value-added
segment was marginally positive but sales of laminated coated wrapping products
were lower. The foil factory in Pietermaritzburg was closed and absorbed into
the Pinetown operation.
There was good demand for crates and drums.
Europe
Sales in pounds increased by 6% to GBP58 million whilst trading income remained
unchanged at GBP5.7 million. The higher polymer prices could not immediately be
recovered.
Group services
Revenue Trading
income
2008 2007 2008 2007
Rm Rm Rm Rm
Africa - - 46 54
Europe 177 167 22 16
Intergroup eliminations (202) (189) - -
Total (25) (22) 68 70
Group services comprise corporate functions, procurement, treasury and property
rentals.
PROSPECTS
Since the end of March, interest rates have risen further and consumer spending
on non-durable goods in South Africa is expected to remain under pressure.
The percentage decline in trading income for the full year is, however, expected
to be less than that in the first half.
In view of the tightening liquidity in financial markets, together with the
funding requirement for major projects in the group, the board considers it
appropriate to strengthen the balance sheet. These factors and the decrease in
trading income have resulted in the cash distribution for the half-year being
reduced to 28.0 cents per ordinary share.
3 YEAR PLAN PROGRESS
Further increases are expected in the prices of raw materials and greater focus
will have to be placed on the timeous recovery of the additional costs.
The significant investments in recycled brown paper manufacture and increased
glass capacity are well advanced to contribute to earnings in 2009. In addition,
plans are in place to reduce working capital and operating costs and benefits
are already accruing from the group procurement initiative.
Opportunities to fill the second folding cartons line in Nigeria are being
actively pursued and, together with the Angolan beverage can line, will
significantly increase the contribution from the rest of Africa over the next
few years.
Action plans are in place to improve the performance of those businesses which
have been worst affected by competitive and other pressures in the past six
months.
Notwithstanding the decline in trading performance in the first half of 2008,
the three-year plan is expected to deliver real earnings growth.
DIRECTORATE
Mr N Cumming decided to leave the group after 22 years' service and resigned as
a director with effect from 27 March 2008. The board wishes to thank Neil for
his valuable contribution to the group.
CAPITAL REDUCTION
Notice is hereby given that a cash distribution No.5 of 28.0 cents (2007: 33.0
cents) per ordinary share has been declared out of share premium in respect of
the six months ended 31 March 2008, payable to shareholders recorded as such in
the register at the close of business on the record date, Friday 11 July 2008.
The last day to trade to participate in the cash distribution is Friday 4 July
2008. Shares will commence trading ex distribution from Monday 7 July 2008.
The important dates pertaining to this cash distribution are as follows:
Last day to trade ordinary shares cum Friday 4 July 2008
distribution
Ordinary shares trade ex distribution Monday 7 July 2008
Record date Friday 11 July 2008
Payment date Monday 14 July 2008
Ordinary share certificates may not be de-materialised or re-materialised
between Monday 7 July 2008 and Friday 11 July 2008, both days inclusive.
On behalf of the board
T Evans Chairman
GE Bortolan Chief executive officer
22 May 2008
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), TN Jacobs (Chief financial officer).
Secretary: NP O'Brien.
Registered office: Share registrar:
Nampak Centre, 114 Dennis Road Computershare Investor
Atholl Gardens, Sandton 2196 Services (Pty) Limited
South Africa 70 Marshall Street
(PO Box 784324 Sandton 2146 Johannesburg 2001, South Africa
South Africa) (PO Box 61051 Marshalltown 2107
Telephone: +27 11 719 6300 South Africa)
Telephone: +27 11 370 5000
Sponsor:
UBS South Africa (Pty) Limited
These results and a presentation to analysts and shareholders are available on
the group's website at www.nampak.com
SUPPLEMENTARY INFORMATION
Trading income
Profit from Abnormal items before
operations abnormal items
2008 2007 2008 2007 2008 2007
Rm Rm Rm Rm Rm Rm
Adjusted segmental
information
Metals and glass
Africa 397 377 (34) 29 363 406
Paper
Africa 123 148 5 25 128 173
Europe 57 51 - 2 57 53
Plastics
Africa 66 121 (1) 18 65 139
Europe 81 78 - 1 81 79
Group services
Africa 81 39 (35) 15 46 54
Europe 19 (33) 3 49 22 16
Total 824 781 (62) 139 762 920
Margin before
abnormal items
2008 2007
% %
Adjusted segmental information
Metals and glass
Africa 14.7 17.2
Paper
Africa 5.3 7.3
Europe 3.5 3.4
Plastics
Africa 4.2 9.2
Europe 9.7 10.3
Group services
Africa
Europe
Total 8.6 10.8
Basis of calculation
Abnormal items are defined as items of income and expenditure which do not arise
from normal trading activities or are of such a size, nature or incidence that
their disclosure is relevant to explain the performance for the period.
Date: 22/05/2008 14:35:02 Produced by the JSE SENS Department.
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