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NPK
NPK
NPK - Nampak - Interim Report And Cash Distribution For The Six Months Ended
31 March 2009
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 2009
CONDENSED GROUP INCOME STATEMENT
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2009 2008 Change 2008
Notes Rm Rm % Rm
Revenue 10 091.2 8 874.6 13.7 18 457.5
Trading income 2 781.4 762.1 2.5 1 536.6
before abnormal
items
Net abnormal 3 (74.4) 61.7 (587.3)
(expense)/gain
Profit from 707.0 823.8 (14.2) 949.3
operations
Finance costs (226.8) (163.5) (400.6)
Finance income 69.6 49.5 135.2
Income from 5.5 5.1 5.1
investments
Share of profit from 2.7 3.9 8.7
associates
Profit before tax 558.0 718.8 (22.4) 697.7
Income tax 169.8 86.2 202.4
Profit for the 388.2 632.6 (38.6) 495.3
period
Attributable to:
Equity holders of 395.2 645.9 (38.8) 516.1
the company
Minority interest (7.0) (13.3) (20.8)
388.2 632.6 495.3
Basic earnings per 67.5 110.4 (38.9) 88.2
share (cents)
Fully diluted 67.2 104.1 (34.1) 88.8
earnings per share
(cents)
Cash distribution 18.0 28.0 (35.7) 100.0
per share (cents)
Headline earnings 66.9 109.9 (39.1) 177.3
per ordinary share
(cents)
Fully diluted 66.7 103.6 (34.4) 174.7
headline earnings
per share (cents)
CONDENSED GROUP BALANCE SHEET
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2009 2008 2008
Notes Rm Rm Rm
ASSETS
Non-current assets
Property, plant and 7 110.8 6 517.1 6 746.6
equipment and investment
property
Goodwill and other 476.0 1 139.2 473.1
intangible assets
Other non-current assets 460.8 298.2 298.6
and associates
Deferred tax assets 4.6 6.5 11.6
8 052.2 7 961.0 7 529.9
Current assets
Inventories 2 887.3 2 705.9 2 640.7
Trade receivables and 3 317.4 3 559.1 3 525.4
other current assets
Tax assets 16.9 15.4 38.9
Bank balances, deposits 4 882.3 738.3 1 727.9
and cash
7 103.9 7 018.7 7 932.9
Assets classified as held 36.2 46.7 52.2
for sale
TOTAL ASSETS 15 192.3 15 026.4 15 515.0
EQUITY AND LIABILITIES
Capital and reserves
Capital reserves 5 (473.7) 114.1 (76.8)
Other reserves (55.7) 658.6 176.0
Retained earnings 6 254.5 5 990.8 5 859.3
Equity attributable to 5 725.1 6 763.5 5 958.5
equity holders of the
company
Minority interest 28.3 42.7 33.4
Total equity 5 753.4 6 806.2 5 991.9
Non-current liabilities
Loans and borrowings 1 978.6 597.1 1 741.1
Retirement benefit 1 270.5 618.1 1 129.1
obligation
Other non-current 7.5 14.7 71.1
liabilities
Deferred tax liabilities 442.0 668.6 495.9
3 698.6 1 898.5 3 437.2
Current liabilities
Trade payables, provisions 3 416.7 3 007.2 3 366.5
and other current
liabilities
Bank overdrafts 4 391.5 2 868.6 506.2
Loans and borrowings 1 872.9 332.4 2 064.1
Tax liabilities 59.2 113.5 149.1
5 740.3 6 321.7 6 085.9
TOTAL EQUITY AND 15 192.3 15 026.4 15 515.0
LIABILITIES
CONDENSED GROUP CASH FLOW STATEMENT
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2009 2008 2008
Notes Rm Rm Rm
Operating profit before 1 176.9 1 135.2 2 553.9
working capital changes
Working capital changes (94.0) (473.1) (159.7)
Cash generated from 1 082.9 662.1 2 394.2
operations
Net interest paid (199.1) (133.5) (324.8)
Income from investments 5.5 5.1 14.2
Tax paid (228.9) (378.5) (558.9)
Replacement capital (287.1) (313.6) (645.3)
expenditure
Cash retained 373.3 (158.4) 879.4
from/(utilised in)
operations
Cash distributions and (421.7) (480.9) (646.5)
dividends paid
Net cash (utilised (48.4) (639.3) 232.9
in)/retained from
operating activities
Net cash utilised in (673.2) (440.2) (803.5)
investing activities
Net cash utilised before (721.6) (1 079.5) (570.6)
financing activities
Net cash generated 11.9 (86.8) 2 817.5
from/(utilised in)
financing activities
Net (decrease)/increase in (709.7) (1 166.3) 2 246.9
cash and cash equivalents
Cash and cash equivalents 4 1 221.7 (1 000.0) (1 000.0)
at beginning of period
Translation of cash in (21.2) 36.0 25.2
foreign subsidiaries
Cash and cash equivalents 4 490.8 (2 130.3) 1 221.7
at end of period
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2009 2008 2008
Rm Rm Rm
Exchange differences on (113.0) 562.2 262.1
translation of foreign operations
Net actuarial losses from (116.8) - (186.1)
retirement benefit obligation
Deferred tax adjustments on - (12.0) -
actuarial losses
Gains on cash flow hedges - 19.1 7.4
Net (expense)/income recognised (229.8) 569.3 83.4
directly in equity
Transfer to plant and equipment - - (7.3) (7.4)
cash flow hedges
Transfer to income statement - - - 0.1
cash flow hedges
Profit for the period 388.2 632.6 495.3
Total recognised income and 158.4 1 194.6 571.4
expense for the period
Attributable to:
Equity holders of the company 163.5 1 199.4 585.5
Minority interest (5.1) (4.8) (14.1)
158.4 1 194.6 571.4
NOTES
Unaudited Audited
6 months year
ended ended
31 March 30 Sept
2009 2008 2008
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 2008 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 368.1 332.0 674.0
Amortisation 41.5 37.3 76.9
3. Net abnormal (expense)/gain
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.
Financial instruments fair (63.3) 104.6 25.6
value adjustment
Share based payment (expense)/ (10.2) (17.8) 12.8
reversal on BEE transaction
Retrenchment and restructuring (4.1) (26.5) (94.4)
costs
Net impairment gains/(losses) 3.2 1.4 (601.7)
on goodwill, plant, property
and equipment and intangible
assets
Insurance proceeds from Thorpe - - 161.0
fire
Net profit on disposal of - - 19.5
property
Net profit on disposal of - - 5.4
businesses
Provision for onerous leases - - (64.7)
Loss resulting from Thorpe fire - - (50.8)
(74.4) 61.7 (587.3)
4. Cash and cash equivalents
Bank overdrafts (391.5) (2 868.6) (506.2)
Bank balances, deposits and 882.3 738.3 1 727.9
cash
490.8 (2 130.3) 1 221.7
5. Capital reserves
Share capital 35.5 35.5 35.5
Share premium 351.2 1 004.2 825.1
Treasury shares (1 163.0) (1 235.5) (1 215.2)
Share option reserve 302.6 309.9 277.8
(473.7) 114.1 (76.8)
The share premium account is
reduced by the cash
distributions that have been
paid in lieu of dividends. This
has given rise to a negative
capital reserve balance as the
sum total value of share
capital, share premium and the
share option reserve is below
that of the treasury shares
which is shown as a debit (or
negative value) in reserves.
6. Determination of headline
earnings
Profit attributable to equity 395.2 645.9 516.1
holders of the company for the
period
Less: preference dividend - - (0.1)
Basic earnings 395.2 645.9 516.0
Adjusted for:
Net impairment (gains)/ loss on (3.2) (1.4) 601.7
goodwill, plant, property and
equipment and intangible assets
Net profit on disposal of - - (5.4)
businesses
Net profit on disposal of (1.5) (2.7) (14.3)
property, plant and equipment
and intangible assets
Europe loss on assets destroyed - - 40.2
in Thorpe fire
Europe insurance proceeds - - (125.2)
Tax effects 1.3 1.1 30.5
Minority interest - - (5.7)
Headline earnings for the 391.8 642.9 1 037.8
period
7. 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.
8. Share statistics
Ordinary shares in issue (000) 658 142 657 647 658 142
Ordinary shares in issue - net 585 650 585 156 585 650
of treasury shares (000)
Weighted average number of 585 650 585 211 585 301
ordinary shares on which
headline earnings and basic
earnings per share are based
(000)
Weighted average number of 605 188 631 874 607 684
ordinary shares on which
diluted headline earnings and
diluted basic earnings per
share are based (000)
9. Supplementary information
Capital expenditure 759.1 771.9 1 576.0
- expansion 472.0 458.3 908.3
- replacement 287.1 313.6 667.7
Capital commitments 756.7 1 171.8 1 187.7
- contracted 462.6 773.7 420.1
- approved not contracted 294.1 398.1 767.6
Lease commitments 411.7 469.6 488.6
- land and buildings 325.3 370.8 411.8
- other 86.4 98.8 76.8
Contingent liabilities 3.4 18.3 18.4
- customer claims and 3.4 18.3 18.4
guarantees
10. Additional disclosures
Net gearing 58% 45% 43%
Interest cover 4.4 times 7.2 times 3.6 times
Total liabilities: equity 166% 121% 159%
Return on equity 14% 19% 9%
Return on net assets 13% 15% 10%
Net worth per ordinary share 982 1 163 1 023
(cents)*
Tangible net worth per ordinary 901 968 942
share (cents)*
*calculated on ordinary shares in issue - net of treasury shares
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.
GROUP PERFORMANCE
Revenue Trading income
2009 2008 2009 2008
Rm Rm Rm Rm
South Africa 6 628 5 919 569 574
Rest of Africa 822 500 62 28
Europe 2 836 2 658 150 160
Intergroup eliminations (195) (202) - -
Total 10 091 8 875 781 762
Group
Revenue grew by 14% due mainly to the recovery of raw material cost increases
and an improvement in trading activity in the rest of Africa. Volumes were
flat in South Africa and lower in Europe.
The increase in trading income was 3% whilst the trading margin declined from
8.6% to 7.7%. The late commissioning of the new paper mill at Rosslyn impacted
significantly on the performance of the Africa paper segment and together with
lower trading income from Europe, limited the group`s trading performance.
Profit from operations decreased by 14% due mainly to a loss on the fair value
of financial instruments compared to a gain in the similar period last year.
Net finance costs increased by 38% to R157 million as a result of higher
interest rates and capital expenditure.
The effective tax rate increased to a more normalised 30.4% compared to 12.0%
last year which included the write-back of a provision following an agreement
with SARS on a number of tax related matters.
Headline earnings per share decreased by 39% from 110 cents to
67 cents. A loss of R63 million on the fair value of financial instruments
compared to a gain of R105 million last year and the tax provision write-back
of R103 million were the main contributing factors to the decline. The fair
value of financial instruments adjustment relates mainly to the process of
mark-to-market valuing of the group`s aluminium futures, interest rate swaps
and forward cover contracts for capital equipment and raw materials.
In line with the board`s stated intention to increase its distribution per
share cover to two times, a distribution of 18 cents per share has been
declared.
Total capital expenditure was R759 million with R125 million spent on the
completion of the Rosslyn paper mill and R248 million on the Angolan beverage
can factory.
Despite having to import high-priced tinplate in advance of the planned
maintenance shutdown by the sole supplier in South Africa, working capital was
well-controlled and decreased by 14% compared to the revenue increase of 14%.
As a consequence, cash generated from operations increased by R421 million to
R1.08 billion.
Net debt to equity increased from 43% in September 2008 to 58% in March 2009
mainly as a result of increased finance costs, capital expenditure and payment
of the final 2008 cash distribution.
South Africa
The weaker economy which has seen lower retail sales growth resulted in there
being no packaging volume growth in the period under review. Acceptable demand
in the first quarter was offset by weaker demand in the second quarter. There
was good demand for all forms of beverage packaging, most forms of plastic
packaging and food cans, but there was reduced demand for paper packaging.
Polymer prices decreased in line with lower oil prices. Paper prices increased
at the beginning of the financial year but the prices of some grades have
since reduced. In many cases the additional cost could not be fully recovered.
Additional costs associated with the late commissioning of the Rosslyn paper
mill negated what would otherwise have been a good improvement in trading
income. This decreased marginally from
R574 million to R569 million whilst the trading margin fell from 9.7% to 8.6%.
Rest of Africa
The increase in trading income is partly due to the non-recurrence of the
write-off last year in Nigeria following the accounting irregularities as well
as an improvement from Zambia which is beginning to generate higher returns on
newly commissioned capital projects. Rand-translated results from the region
were however negatively affected by declining exchange rates, particularly in
Nigeria.
Trading income increased from R28 million to R62 million and the trading
margin from 5.6% to 7.5%.
Europe
In pounds, sales were 3% ahead of last year at GBP190 million whilst trading
income decreased from GBP11.1 million to GBP10.0 million. The average exchange
rate to the pound was R14.93 compared to R14.40 last year. Trading income was
affected by higher imported polymer costs, lower performance from the Leeds
folding cartons operation as well as increased supply chain costs arising from
the weakness of the pound against the euro.
SEGMENTAL REVIEW
Metals & Glass
Revenue Trading income Margin
2009 2008 2009 2008 2009 2008
Rm Rm Rm Rm % %
Africa 2 923 2 476 400 363 13.7 14.7
Africa
Sales increased by 18% whilst trading income increased by 10%.
There was good demand for beverage cans with local sales increasing by over
6%. Exports to Angola were lower as one of the major customers imported filled
product into Angola following the carbon dioxide supply constraints in South
Africa in the previous year. In total, beverage can sales grew by 3% during
the period under review.
Construction of the new beverage can factory in Angola is in progress,
however, approval of the project by the Angolan Council of Ministers is still
awaited. Assuming that this is granted shortly, commissioning is expected in
the first half of 2010. Bridging funding is being supplied from South African
facilities.
Food can volumes increased by 22% following a recovery in pilchard catches.
Good growth was also achieved in meat, fruit and vegetable cans. Demand for
paint, polish and other industrial cans was well down on last year. Aerosol
cans continued to enjoy growth but at a slower pace than in the past.
There was continued good demand for glass bottles but comparisons with last
year are skewed by the significant supply in 2008 of the new-design 750ml beer
bottles. Manufacturing efficiencies were at industry-standard levels. A new
cullet plant, which will enable greater quantities of recycled glass to be
used, is planned to be commissioned towards the end of the first quarter of
2010.
Paper
Revenue Trading income Margin
2009 2008 2009 2008 2009 2008
Rm Rm Rm Rm % %
Africa 2 783 2 409 75 128 2.7 5.3
Europe 1 768 1 650 49 57 2.8 3.5
Total 4 551 4 059 124 185 2.7 4.6
Africa
Sales increased by 16% but trading income decreased by 41%.
Sales volumes of corrugated boxes decreased by 5% as a result of market
competition and reduced demand in the commercial sector which was particularly
hard-hit by the economic slowdown. The late commissioning of the new Rosslyn
paper mill resulted in increased costs. The mill is now operational and is
manufacturing paper which is meeting both quality and specification standards.
Operational uptime and efficiencies are however not yet at targeted levels.
Volumes of folding cartons were down primarily due to the ongoing conversion
of detergent packaging to flexible packaging. There were increases in sales
volumes of cigarette and fast-food cartons but general food carton demand was
lower than the prior year. Selling prices and margins remain under pressure.
Sales volumes of toilet tissue continued to grow as did disposable diapers and
feminine hygiene products. The market supply situation remains tight and
contributed to an improvement in trading margins.
The folding cartons business in Nigeria continued to perform well although
results in rand were adversely affected by the depreciation of the naira.
Europe
In pounds, sales increased by 3% to GBP119 million whilst trading income
decreased by 19% to GBP3.2 million.
The folding cartons market remains highly competitive, exacerbated by the
slowdown in European economies. The devaluation of the pound also resulted in
higher raw material costs which were difficult to recover. Sales in healthcare
packaging were higher than last year and although trading income was also up
it was supplemented by insurance proceeds from the fire at the Thorpe factory
that occurred last year.
Plastics
Revenue Trading income Margin
2009 2008 2009 2008 2009 2008
Rm Rm Rm Rm % %
Africa 1 744 1 534 111 65 6.4 4.2
Europe 861 831 52 81 6.0 9.7
Total 2 605 2 365 163 146 6.3 6.2
Africa
Sales increased by 14% and trading income by 71%.
There was a strong recovery in demand for PET bottles following the resolution
of the carbon dioxide shortage which impacted on volumes in 2008.
With the exception of plastic paint containers, the tubes and tubs business
experienced good volume growth and operating performance was at a higher level
than last year.
Sales volumes of plastic bottles for milk and juice increased. A new plastic
bottle for long-life milk was introduced and was successfully accepted by
consumers. Demand for crates was lower as customers delayed replacement.
Demand for metal closures increased but was offset by lower demand for plastic
closures.
Market share was gained in flexible packaging and good demand was experienced
for snack food and confectionery packaging. A new flexographic press was
commissioned at the Pinetown factory which will enable new products to be
produced as well as optimising manufacturing efficiencies. The assets of the
Flexpak business used to manufacture printed film, shrink wrap and bread bags
were sold and the transaction is awaiting Competition Commission approval.
Europe
Sales in pounds were virtually unchanged at GBP57 million whilst trading
income declined by 38% to GBP3.5 million. The closure of three dairies
adversely affected volumes and higher once-off supply-chain costs that could
not be fully recovered negatively impacted trading income.
Group services
Revenue Trading income
2009 2008 2009 2008
Rm Rm Rm Rm
Africa - - 45 46
Europe 207 177 49 22
Intergroup eliminations (195) (202) - -
Total 12 (25) 94 68
Group services comprise procurement, treasury, property rentals and corporate
functions. The increase in trading income is mainly due to foreign exchange
gains.
PROSPECTS
Current difficult economic conditions are expected to continue in all the
markets served by the group. We shall therefore focus on improving or
disposing of underperforming operations, the reduction of costs, management of
working capital and reduction of capex.
CHANGES IN THE DIRECTORATE
Mr GE Bortolan retired as an executive director on 31 March 2009.
As previously reported Mr AB Marshall was appointed an executive director and
chief executive officer with effect from 1 March 2009. Messrs RC Andersen and
PM Madi were appointed non-executive directors with effect from 21 November
2008 and Mr RA Williams retired with effect from 21 November 2008.
CAPITAL REDUCTION
Notice is hereby given that in terms of an ordinary resolution passed by
shareholders at the annual general meeting held on 4 February 2009, share
premium will be reduced by payment of capital reduction ("cash distribution")
No.7 of 18.0 cents (2008: 28.0 cents) per ordinary share in respect of the six
months ended 31 March 2009, payable to ordinary shareholders recorded as such
in the register at the close of business on the record date, Friday 10 July
2009. The last day to trade to participate in the cash distribution is Friday
3 July 2009. Shares will commence trading ex distribution from Monday 6 July
2009.
The important dates pertaining to this cash distribution are as follows:
Last day to trade ordinary shares cum Friday 3 July 2009
distribution
Ordinary shares trade ex distribution Monday 6 July 2009
Record date Friday 10 July 2009
Payment date Monday 13 July 2009
Ordinary share certificates may not be de-materialised or re-materialised
between Monday 6 July 2009 and Friday 10 July 2009, both days inclusive.
On behalf of the board
T Evans Chairman
AB Marshall Chief executive officer
21 May 2009
Non-executive directors:
T Evans* (Chairman), RC Andersen*, DA Hawton*, MM Katz*, RJ Khoza,
PM Madi*, KM Mokoape*, CWN Molope*, ML Ndlovu*, RV Smither*,
MH Visser.
*Independent
Executive directors:
AB Marshall (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 will be
available on the group`s website at www.nampak.com
SUPPLEMENTARY INFORMATION
Trading
income
Profit from Abnormal before
operations items abnormal
items
2009 2008 2009 2008 2009 2008
Rm Rm Rm Rm Rm Rm
Adjusted
segmental
information
Metals and Glass
Africa 396 397 4 (34) 400 363
Paper
Africa 61 123 14 5 75 128
Europe 52 57 (3) - 49 57
Plastics
Africa 109 66 2 (1) 111 65
Europe 52 81 - - 52 81
Group services
Africa (12) 81 57 (35) 45 46
Europe 49 19 - 3 49 22
Total 707 824 74 (62) 781 762
Margin before
abnormal items
2009 2008
% %
Adjusted segmental information
Metals and Glass
Africa 13.7 14.7
Paper
Africa 2.7 5.3
Europe 2.8 3.5
Plastics
Africa 6.4 4.2
Europe 6.0 9.7
Group services
Africa
Europe
Total 7.7 8.6
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: 21/05/2009 14:25:01 Produced by the JSE SENS Department.
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