| Thu 25 Nov 2004, 13:44 | | RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 |
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NAMPAK LIMITED -AUDITED GROUP RESULTS AND DECLARATION OF DIVIDEND
Nampak Limited
(Registration number 1968/008070/06)
(Incorporated in the Republic of South Africa)
Share Code: NPK
ISIN: ZAE 000004933
AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004
HIGHLIGHTS
* Cash operating profit of R2.4 billion
* Net gearing improved to 21%
* Dividend increased by 20%
* Net worth per share increased by 11%
Group Income Statement
2004 2003 Change
Notes Rm Rm %
Revenue 17 494.6 18 174.0 (3.7)
Continuing operations 17 178.9 17 494.0 (1.8)
Discontinued operations 315.7 680.0 (53.6)
Profit before abnormal items 1 1 562.1 1 801.6 (13.3)
Abnormal items 2 (70.5) 64.5
Profit from operations 3 1 632.6 1 737.1 (6.0)
Continuing operations 1 379.5 1 628.2 (15.3)
Discontinued operations 4 253.1 108.9 132.4
Net finance costs 5 (149.0) (252.9)
Income from investments 15.6 5.7
Profit before tax 1 499.2 1 489.9 0.6
Income tax 521.7 566.9
Profit after tax 977.5 923.0 5.9
Minority interest 10.4 19.5
Net profit for the year 967.1 903.5 7.0
Number of ordinary shares in 641 574 640 571
issue (000)
Weighted average number of
ordinary shares on which
headline earnings and basic
earnings per share are
based (000)
640 958 640 444
Weighted average number of
ordinary shares on which
diluted headline earnings
and diluted basic earnings
per share are based (000)
644 705 642 681
Headline earnings per 146.1 145.4 0.5
ordinary share (cents)
Basic earnings per share 150.9 141.1 6.9
(cents)
Dividend per share (cents) 83.6 69.7 20.0
Fully diluted headline 145.3 144.9 0.3
earnings per share (cents)
Fully diluted earnings per 150.0 140.6 6.7
share (cents)
Determination of headline
earnings
Net profit for the year 967.1 903.5
Less: preference dividend (0.1) (0.1)
Adjusted for:
Impairment losses 127.9 9.9
Goodwill amortised 60.5 61.3
Capital restructuring costs - 7.9
Net (profit)/loss on disposal (216.5) 0.9
of business
Net profit on disposal of
property,
plant & equipment (13.7) (3.8)
Capital equipment damage - (74.6)
proceeds
Loss on re-organisation of - 7.8
debt
Tax effects 11.3 18.4
Headline earnings for the 936.5 931.2 0.6
year
Group Statement of Changes in Equity
2004 2003
Rm Rm
Equity at beginning of year 4 855.1 4 785.8
Changes in capital 8.7 2.3
Share capital 0.1 -
Share premium - share option scheme 9.1 2.3
consolidation of shares (0.5) -
held by share purchase trust
Changes in non-distributable reserves 45.3 (479.9)
Decrease in foreign currency translation (41.8) (463.8)
reserve
Hyperinflation capital adjustment 88.7 (16.1)
Financial instruments - hedging (1.6) -
Changes in accumulated profit 490.5 546.9
Net profit for the year 967.1 903.5
Ordinary shares - dividends (476.5) (409.4)
Preference shares - dividends (0.1) (0.1)
Negative goodwill recognised directly in equity - 71.9
Change in accounting policy - (19.0)
Equity at end of year 5 399.6 4 855.1
Group Balance Sheet
2004 2003
Notes Rm Rm
Assets
Non-current assets 5 512.1 5 430.5
Property, plant and equipment 4 228.1 4 255.7
Goodwill and other intangibles 1 240.4 1 092.3
Investments 43.6 82.5
Current assets 5 443.6 5 643.7
Inventories 2 055.9 2 051.8
Trade and other receivables 2 688.2 2 843.4
Bank balances, deposits and cash 6 699.5 748.5
Total assets 10 955.7 11 074.2
Equity and liabilities
Capital and reserves 5 399.6 4 855.1
Capital 2 042.4 2 033.7
Non-distributable reserves (249.6) (294.9)
Accumulated profits 3 606.8 3 116.3
Minority interest 32.8 92.7
Non-current liabilities 1 659.1 1 771.8
Interest bearing debt 6 1 091.5 1 289.0
Net long-term retirement benefit 161.9 147.8
obligation
Net deferred tax liabilities 405.7 335.0
Current liabilities 3 864.2 4 354.6
Trade and other payables 2 938.9 3 231.8
Interest bearing debt 6 752.9 768.5
Net tax liabilities 172.4 354.3
Total equity and liabilities 10 955.7 11 074.2
Gross gearing 36% 42%
Net gearing 21% 26%
Total liabilities: total average 109% 125%
shareholders` funds
Net worth per ordinary share (cents)
calculated on number of ordinary
shares in issue of 641 574 291 (2003:
640 571 091)
842 758
Tangible net worth per ordinary share
(cents) calculated on number of
ordinary shares in issue of
641 574 291 (2003: 640 571 091)
648 587
Group Cash Flow Statement
2004 2003
Note Rm Rm
Cash operating profit 2 381.7 2 686.1
Working capital changes (251.5) (679.2)
Net interest paid (149.0) (252.9)
Income from investments 15.6 5.7
Tax paid (645.1) (367.9)
Retirement benefit contributions (88.4) (44.1)
Replacement capital expenditure (394.4) (441.6)
Net cash inflow from operating activities 868.9 906.1
Net cash outflow from investing (639.2) (597.3)
activities
Net cash inflow before financing 229.7 308.8
activities
Net cash outflow from financing (277.7) (290.9)
activities
Net (decrease)/increase in cash
and cash equivalents (48.0) 17.9
Cash and cash equivalents at beginning of 17.2 121.9
year
Translation of cash in foreign 2.5 (122.6)
subsidiaries
Cash and cash equivalents at end of year 6 (28.3) 17.2
Notes
2004 2003 Change
Rm Rm %
1. Profit before abnormal items
South Africa 1 186.6 1 400.5 (15.3)
Africa 142.8 99.4 43.7
Europe 232.7 301.7 (22.9)
1 562.1 1 801.6 (13.3)
2. Abnormal items
Retrenchment costs 40.8 48.1
Restructuring costs 19.8 10.9
Impairment losses 127.9 10.0
Net profit on disposal of property (7.6) (13.6)
Net (profit)/loss on disposal of (216.5) 0.9
business
Loss on re-organisation of debt - 7.8
Net monetary adjustment - 15.1 5.4
hyperinflation
Financial instruments fair value (70.9) 48.5
adjustment
FEC costs on fixed assets 20.9 21.1
Capital equipment damage proceeds - (74.6)
(70.5) 64.5
3. Profit from operations
South Africa 1 411.0 1 398.4 0.9
Africa 127.7 95.4 33.9
Europe 93.9 243.3 (61.4)
1 632.6 1 737.1 (6.0)
4. Discontinued operations
Profit on disposal of discontinued 213.2 -
operations
Profit from discontinued operations 39.9 108.9
253.1 108.9
5. Net finance costs
Interest paid (217.7) (316.7)
Interest received 68.7 63.8
(149.0) (252.9)
6. Cash and cash equivalents
Interest bearing debt (1 844.4) (2 057.5)
Less long-term liabilities 1 091.5 1 289.0
Less short-term portion of long-term 25.1 37.2
liabilities
Bank balances, deposits and cash 699.5 748.5
(28.3) 17.2
7. Supplementary information
Depreciation 710.0 715.4
Amortisation 90.9 66.7
Capital expenditure 1 065.7 884.4
- expansion 628.1 442.8
- replacement 437.6 441.6
Capital commitments 564.1 459.0
- contracted 237.1 222.2
- approved not contracted 327.0 236.8
Lease commitments 512.6 514.6
- land and buildings 450.1 427.9
- other 62.5 86.7
Contingent liabilities 62.5 146.3
Comments
NAMPAK PROFILE
Nampak is the largest and most diversified packaging manufacturer in Africa and
also has operations in several countries in Europe. In South Africa Nampak
operates from 110 sites and offers the widest product range of any packaging
company in the world, providing customers with a total solution to their
packaging needs. To support our total packaging solutions philosophy the group
operates the most comprehensive research and development facility of its kind in
the southern hemisphere. In addition to packaging, the group is extensively
involved in collecting and recycling all types of used packaging. Nampak is also
the largest South African manufacturer of tissue paper products and holds a
substantial share of the paper merchanting market.
In the rest of Africa Nampak has 19 operations in 11 countries manufacturing a
range of metal, paper and plastic packaging products whilst in Europe, where it
is the major supplier of plastic milk bottles and one of the leading
manufacturers of folding cartons, it operates from 26 locations in 8 countries.
KEY INVESTMENT ACTIVITIES IN 2004
On 29 February 2004 Nampak sold its interest in NamITech Holdings Limited to
Allied Technologies Limited for a total consideration of R476 million.
On 11 March 2004 M.Y. Holdings acquired the Diehl group for Euro12.4 million.
Diehl has operations in France, Germany and Luxembourg and is a leading European
producer of patient-information leaflets for the pharmaceutical industry.
On 30 October 2004 Nampak Plastic`s packaging business in Europe sold its Short
Run operations to RPC Group plc for a consideration of GBP23 million.
GEOGRAPHICAL PERFORMANCE
Geographical overview
Revenue Profit from Operating
Operations * margin %
Rm 2004 2003 2004 2003 2004 2003
Continuing
operations
South Africa 11 868 11 968 1 158 1 290 9.8 10.8
Rest of Africa 886 698 128 95 14.4 13.7
Europe 4 882 5 262 94 243 1.9 4.6
Intergroup (457) (434)
eliminations
17 179 17 494 1 380 1 628 8.0 9.3
Discontinued
operations
South Africa 316 680 253 109
Total 17 495 18 174 1 633 1 737 9.3 9.6
* After abnormal items
Group
Revenue from continuing operations declined by 2% to R17.2 billion as a result
of the stronger rand and lower increases in the cost of raw materials which
constrained selling price increases. Profit from continuing operations declined
by 15% whilst the operating margin fell to 8.0% from 9.3% in 2003.
NamITech, which was included in the results for 5 months, realised a profit on
disposal of R213 million.
Abnormal items include the following:
* Retrenchment costs of R41 million and restructuring costs of R20 million
arising mainly from the closure of the Tring folding cartons factory in the
United Kingdom and factory rationalisations in South Africa.
* An impairment cost of R103 million in respect of the Short Run plastic
packaging business in Europe and R17 million in respect of the tissue mills in
Swaziland.
* Forward exchange costs of R21 million on imported capital equipment.
* A profit of R71 million on the fair valuing of financial instruments in terms
of AC 133.
* A profit of R213 million on the sale of NamITech.
Net financing costs reduced by 41% to R149 million due to improved gearing
following the receipt of the proceeds from the sale of NamITech, lower interest
rates in South Africa and translation of offshore interest charges at a lower
currency exchange rate. The improvement is also due to a R22 million cost in the
prior year relating to the unwinding of an interest rate hedge. Net gearing
reduced to 21% from 26% in 2003 notwithstanding investment of over R1 billion in
capital expenditure of which R600 million was in new projects.
Taxation declined from R567 million to R522 million whilst the effective tax
rate declined from 38.1% to 34.8% partly due to the inclusion of the profit on
the sale of NamITech that attracted capital gains tax at a lower rate. The
effective tax rate has remained relatively high due to the inclusion of prior
year tax charges and the release of a deferred tax asset from the United Kingdom
and the effect of the impairment of the European Short Run plastics assets that
did not qualify for tax relief.
The decline in operating profits was offset by lower finance and taxation
charges and the benefit of abnormal items, resulting in attributable profit
rising by 7% and headline earnings per share increasing by 0.5% to 146.1 cents.
South Africa
The South African retail sector enjoyed strong growth, underpinned by increased
consumer spending from a growing middle class and several interest rate
reductions. Much of this new spend was directed at durable and semi-durable
goods and services and non-durable goods` share of private expenditure continued
its relative decline.
The markets served in South Africa all enjoyed positive growth but this was
muted in the local manufacturing sector by increased imports of finished
products notably in the food sector, and particularly in sugar-based
confectionery where imported products have grown significantly in the past two
years. Growth was also seen in imports of packaging.
The strength of the rand affected the profitability of the group`s and its
customers` exports. Whilst overall direct and indirect exports have remained at
over 20% of South African sales, the mix of this business has changed quite
considerably over the past year with a number of divisions suffering reductions
in export margins and volumes.
Excluding the effect of translation of foreign earnings, it is estimated that
the impact of the stronger rand on profits in the year was approximately R180
million.
It is expected that the fundamental strength in the economy will deliver growth
in the markets served by the group and R508 million has been invested in
equipment for the manufacture of new products and to meet increased demand.
These include a slim-line beverage can, an easy-open end for food cans,
increased capacity for folding cartons, labels and PET bottles and a number of
other innovation-based growth projects.
Rest of Africa
Both revenue and operating profit were substantially higher than last year. The
metals businesses all exceeded expectations with good volume growth in Kenya and
Nigeria. In Zimbabwe, a lower tobacco crop resulted in lower sales of corrugated
boxes but there was strong demand for plastic bottles from beverage and edible
oil customers.
Construction of the new folding cartons plant in Nigeria at a cost of R155
million is on schedule and is expected to be fully commissioned in the first
half of 2005. Production will shortly commence in a temporary facility pending
completion of the new factory.
Europe
Inflation remained low in most European countries and despite steady volume
growth the packaging industry remained highly competitive.
Sales revenue in sterling increased by 3% to GBP394 million as a result of gains
in market share but reduced by 7% in rand terms to R4.9 billion as a result of
the exchange rate movement.
Profits were negatively affected by continued margin pressure and a number of
one-off items such as the costs associated with the closure of the Tring folding
cartons factory, disruption and reorganisation costs in re-equipping the Leeds
factory and the impairment of the Short Run plastic packaging business at the
balance sheet date.
A 10% strengthening of the average exchange rate from R13.15 to the pound in
2003 to R11.84 in 2004 resulted in a lower rand translation.
SEGMENTAL ANALYSIS
Metals & Glass
Revenue Profit from Operating
operations* margin %
Rm 2004 2003 2004 2003 2004 2003
Africa 4 603 4 483 562 623 12.2 13.9
* After abnormal items
Africa
Despite good demand for beverages in South Africa, sales of beverage cans for
domestic consumption continued to decline. However, overall volumes were better
than last year as a result of higher direct and indirect exports. Beverage
closures experienced good growth in line with the strong demand for plastic
beverage packaging.
Sales of food cans for fish were adversely affected by consumers switching to
lower-priced protein alternatives whereas canned fruit exports were lower as a
result of the stronger rand. There was good demand for aerosol, polish and paint
cans.
The businesses in the rest of Africa all exceeded expectations with good volume
growth in Kenya and Nigeria.
Following the fire that occurred in 2003 the glass business had a very poor year
as a result of difficulties in achieving industry-standard efficiency levels
from the new furnace, compounded by lost sales opportunities following
overstocking of imported bottles by some customers. The business has been
restructured and manufacturing efficiencies are improving.
Paper
Revenue Profit from Operating
operations* margin %
Rm 2004 2003 2004 2003 2004 2003
Africa 5 473 5 490 348 452 6.4 8.2
Europe 2 815 2 883 85 211 3.0 7.3
Total 8 288 8 373 433 663 5.2 7.9
* After abnormal items
Africa
In South Africa the expiry of a favourable paper supply contract, the impact of
the stronger rand and a highly competitive corrugated box market contributed to
the decline in overall profitability of the paper sector. A lower tobacco crop
in Zimbabwe and the loss of some export business resulted in lower sales of
corrugated boxes.
Good growth was achieved by Redibox which supplies corrugated boxes and other
packaging direct to the public.
The stronger rand caused substantial loss of paper sack export business and,
together with weak demand from domestic milling and sugar customers as well as
some loss of market share, overall volumes were well down on last year.
Management action taken during the year will see a significant turnaround in
volumes and profitability.
Sales volumes of cartons and labels were affected by the stronger rand and
imports of confectionery. The two factories in KwaZulu-Natal were consolidated
onto one site in Pinetown and cost savings will be realised in the year ahead.
Investments in new equipment totalling more than R170 million were made for the
growing demand for cartons, labels and bag-in-the-box containers.
Although demand for toilet tissue improved, selling prices came under pressure
from industry overcapacity, a reduction in wastepaper prices and low consumer
price inflation.
Despite slightly better volumes in the paper merchanting market the stronger
rand, imports and excess international capacity, placed pressure on both selling
prices and margins.
Europe
Sales in sterling of folding cartons to the food sector in both the United
Kingdom and the Continent increased on last year following gains in market
share. Profits were however affected by the closure of the Tring factory in the
United Kingdom, higher overtime costs associated with the installation and
commissioning of new equipment in the Leeds factory and additional pension
funding. The factories at Hoogerheide and Londerzeel in Benelux performed better
than expectations.
In the healthcare sector, increased volumes were achieved as a result of market
growth and gains in market share as well as additional sales from the
acquisition of Diehl.
Revenue was affected to some degree by pricing pressures but this business
nevertheless continues to perform well.
Plastics
Revenue Profit from Operating
operations* margin %
Rm 2004 2003 2004 2003 2004 2003
Africa 2 678 2 693 265 243 9.9 9.0
Europe 1 849 2 137 (35) 23 (1.9) 1.1
Total 4 527 4 830 230 266 5.1 5.5
* After abnormal items
Africa
Strong demand from South African milk and juice customers resulted in
substantial volume growth of HDPE bottles. The trend towards greater use of PET
by juice customers continued and, together with strong demand for carbonated
soft-drinks, volumes of PET bottles were significantly up on last year. The
stronger rand resulted in lower indirect exports of large plastic drums but this
was partially offset by the continuing substitution of metal drums. The tubes
and tubs business, which was previously the sole South African supplier of
toothpaste tubes, lost market share to a new local entrant to the market.
The stronger rand resulted in the loss of export volumes and pressure on export
margins of flexible packaging, and also encouraged imports of finished goods,
particularly confectionery. Some importation of packaging also affected local
sales. The profits from this sector were negatively affected and the two
factories in KwaZulu-Natal have been consolidated onto one site in Pinetown.
The plastic packaging businesses in Zambia and Zimbabwe performed better than
expected.
Europe
The Short Run industrial container business, which for some time has not
achieved acceptable results in a highly competitive market, was sold on 30
October 2004. The carrying value of the underlying assets of the business was
impaired by R103 million at the balance sheet date.
Although performance of the Long Run milk and juice bottle business continued at
a satisfactory level, sales were lower than 2003 which included increased sales
following a fire at a competitor`s premises.
Group services
Revenue Profit from
operations*
Rm 2004 2003 2004 2003
Africa 111 67
Europe 218 242 44 9
Intergroup eliminations (457) (434)
Total (239) (192 ) 155 76
* After abnormal items
Group services include head office activities, procurement, insurance, some
centralised information technology costs, marketing, research and development,
treasury and property rentals. This year`s profit includes foreign exchange
gains whereas losses were made in the prior year.
ACCOUNTING POLICIES
The group prepares its annual financial statements in accordance with South
African Statements of Generally Accepted Accounting Practice. The principal
accounting policies have been applied consistently with the previous year except
for the changes set out below.
During the year IFRS 3 Business Combinations was issued and adopted by the
group. This standard is applicable to all business combinations for which the
agreement date is on or after 31 March 2004. No business combinations have been
concluded between the effective date of this standard and the financial year-
end. During the year the group early-adopted IAS29 Hyperinflation. The
motivation for early-adopting the standard was to eliminate the need to
recalculate the hyperinflation on comparative figures as required under AC124
Hyperinflation. Comparative amounts are already reflected in hard currency and
it is the group`s opinion that this change in accounting policy results in
fairer presentation of its financial results.
The group has consolidated its share purchase trust, which has had no material
effect on the financial statements.
AUDITED RESULTS
The results have been audited by Deloitte & Touche and their unqualified audit
opinion and the annual financial statements are available for inspection at the
registered office of the company. The annual report will be posted to
shareholders in December 2004.
DIRECTORATE
Mr RG Tomlinson resigned on 31 August 2004.
Mr JA Monks resigned from the board on 30 September 2004 and will retire from
the company on 31 December 2004.
PROSPECTS
In the year ahead an improvement in operating performance from all three
geographic regions is expected.
However, this will be impacted by increased IT costs in South Africa and likely
further rationalisation of our folding carton capacity in the U.K.
The AC133 profit included in 2004 is unlikely to be repeated in 2005.
These factors together with the assumption of continued rand strength will make
it challenging to deliver an improvement in headline earnings in 2005.
SHARE BUY-BACK
Nampak will commence a general share buy-back programme on the open market in
terms of the authority granted to it by shareholders at the annual general
meeting held on 28 January 2004.
DECLARATION OF ORDINARY DIVIDEND NO.72
Notice is hereby given that a final dividend No.72 of 56.6 cents per share
(2003: 47.2 cents) has been declared in respect of the year ended 30 September
2004, payable to shareholders recorded as such in the register at the close of
business on the record date, Friday 7 January 2005, making a total distribution
for the year of 83.6 cents (2003: 69.7 cents). The last day to trade to
participate in the dividend is Friday 31 December 2004. Shares will commence
trading `ex` dividend from Monday 3 January 2005.
The important dates pertaining to this dividend are as follows:
Last day to trade ordinary shares `cum` Friday 31 December 2004
dividend
Ordinary shares trade `ex` dividend Monday 3 January 2005
Record date Friday 7 January 2005
Payment date Monday 10 January 2005
Ordinary share certificates may not be dematerialised or re-materialised between
Monday 3 January 2005 and Friday 7 January 2005.
On behalf of the board
T Evans GE Bortolan
Chairman Chief executive officer
Sandton
25 November 2004
Non-executive directors:
T Evans (Chairman), PL Campbell*, BP Connellan*, DA Hawton*, MM Katz*, KM
Mokoape*, ML Ndlovu*, MH Visser*, RA Williams*. *Independent
Executive directors:
GE Bortolan (Chief executive officer), RP Becker, N Cumming, AS Lang (British),
AM Marthinusen.
Secretary:
NP O`Brien.
Registered office:
Nampak Centre, 114 Dennis Road, Atholl Gardens, Sandton 2196, South Africa.
(P O Box 784324, Sandton 2146, South Africa).
Telephone: +27 11 719 6300.
Share registrars:
Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street, Johannesburg 2001, South Africa.
(P O Box 62053, Marshalltown 2107, South Africa).
Telephone: +27 11 370 5000.
These results and a presentation to analysts and shareholders is available on
the group`s website www.nampak.com
Joint sponsors
Lead sponsor
UBS
Sponsor
CAZENOVE
Date: 25/11/2004 01:41:05 PM
Produced by the JSE SENS Department
