| Thu 26 May 2005, 18:34 | | Nampak - Press release regarding the interim repor |
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Nampak - Press release regarding the interim report and dividend declaration
NAMPAK LIMITED
(Registration number 1968/008070/06)
(Incorporated in the Republic of South Africa)
Share Code: NPK ISIN: ZAE000004933
`Tough 2005, but improved outlook for 2006` says Nampak
Johannesburg, Thursday 26 May 2005: Improved financial performance in 2006 is
expected following significant restructuring and cost containment initiatives at
Africa`s largest and most diversified packaging manufacturer, Nampak Limited.
The company, which released its interim results in Johannesburg earlier today,
confirmed that while 2005 will remain tough, an upswing in 2006 was likely.
For Nampak, top-line growth remains a real challenge.
According to the interim report, group sales from continuing operations are down
by 9%. However, this figure would reduce to 4% if Peters Papers and the Short
Run plastic industrial containers business in the UK, which were disposed of
during the period under review were excluded.
The balance of the net decline is largely influenced by factors such as the
strong rand, reduced demand for direct and indirect exports, and increased
imports of packaging and finished goods.
The impact of the stronger rand on revenue translation from Nampak`s European
and African businesses counted for a further 1.5% of the group`s total fall in
sales.
However, Nampak is taking bold steps to get into better shape by intensifying
its restructuring and cost containment exercise, which started in 2004. The cost
of restructuring for the full year is expected to be R130 million.
Notwithstanding inflationary pressures, particularly in the areas of employment
expenses and energy, this cost-savings push has reduced Nampak`s spending to
levels, which are lower than the corresponding period in 2004.
Through the sale of non-core businesses and properties during the six months
under review, Nampak managed to unlock an additional R629 million in cash. While
headline earnings per share (HEPS) have reduced by 11%, the company`s strong
balance sheet has enabled it to maintain its dividend per share, retaining
Nampak`s position as one of the highest dividend yield stocks on the ALSI 40.
In South Africa, where Nampak represents some 40% of the total packaging
industry, a focus on the cost leadership strategy includes the implementation of
a flatter management structure, improved capacity utilisation, technology
enhancement, procurement savings and a renewed focus on working capital. The
restructuring costs for this year are expected to be R80 million, with resultant
benefits flowing through from 2006.
For the company`s businesses in the rest of Africa, the group will continue to
align with its major customers` regional supply strategies, investing where
appropriate on the continent and specifically leveraging its position in
Nigeria.
In Europe, significant effort has been expended on addressing the
underperforming folding cartons business in the United Kingdom. Restructuring
costs of R50 million will be spent by the end of the year on the closure of two
plants in Leeds and Leicester to improve the company`s position in this fiercely
competitive market.
Nampak`s Chief Executive Officer, John Bortolan says `Adjusting to significantly
changed market conditions and a much stronger currency have been painful, but I
believe we will emerge from the bottom of the cycle at the end of 2005. As the
results of cost leadership start to take full effect, so our various
stakeholders will begin to realise the benefits.`
Economists forecast that strong consumer spending on non-durable goods, on which
packaging depends, is set to continue at 3.5% per annum over a sustained period.
This growth, which is good news for the company, is substantially higher than in
the previous five years, which averaged about 1.5%.
Despite the signs of a positive turnaround on the horizon, the job is not yet
complete and Bortolan concedes that the second half of 2005 will remain
challenging. `The percentage decline in HEPS for the full year is expected to be
greater than in the first half, but the balance sheet remains strong and the
benefits will start to flow in 2006.`
For further information, please contact:
John Bortolan 011-719-6388
Lauren Winchester (Media Liaison) 083-421-9683
Date: 26/05/2005 12:58:04 PM
Produced by the JSE SENS Department
