Key message: Weakness in all regions before any Covid-19 impact means cash
flows remain under pressure, and currency liquidity in Angola and Nigeria is
deteriorating. Debt covenants remain a concern, with a relaxation most likely
required for year-end.
- Nampak reported 1H FY20 results. Turnover from continuing operations declined by 17% and trading and operating profit declined by 39% and 68% respectively. Dividends continue to be passed. The result was minimally impacted by Covid-19, with weak economic conditions in South Africa, Angola and Nigeria being the primary driver of the declines.
- Metals: Revenue down 20%, trading profit down 42%. The results were impacted by weak markets in South Africa (loss of large Divfood customer, lower ends sales into Angola and increased competition in bevcans) and Angola (significant demand drop and 46% currency devaluation). Demand in Nigeria grew despite a slowing economy.
- Plastics: Revenue and trading profit down 8% and 10% respectively. Restructuring benefits improved the divisions performance, with a fire at a key customer’s premises impacting volumes. Zimbabwean demand declined in line with the economy. Nampak Europe has been sold.
- Paper: Revenue down 14% but trading profit increased 41%. A good tobacco crop in Zimbabwe boosted Hunyani’s result but demand in Zambia and Malawi declined.
- A large impairment of the Nigerian and Angolan bevcan assets was incurred, with USD130m of goodwill in Nigeria written off.
- Nampak was able to secure a relaxation of debt covenants for the period, with net debt: EBITDA of 3.3x within the revised 3.5x covenant (normal covenant 3.0x). Nampak is yet to secure further covenant relaxations for year-end.
- Cash transfers from the rest of Africa was strong with R1.6bn transferred, but the weak oil prices are starting to impact liquidity in Nigeria. Nampak has made a decision to stop hard currency transfers into Nigeria and Angola and will adjust production accordingly. This may result in lower production levels in future even if there is demand.