Nampak expects to deliver vigorous growth in the second half of the year after its Nigerian business surprised the market during the six months ended March 2021 as it recovered quickly from severe Covid-19 pandemic lockdowns with a strong growth in the beverage cans and general metals packaging segments.
Nampak, Africa’s leading packaging group, said on Friday that improved trading conditions in the current year and the benefits of cost savings initiatives already implemented to date should result in a much-improved performance in South Africa.
“Demand in Nigeria is expected to remain strong for the remainder of the year. We are making good progress with our goal to simplify the group,” said Nampak.
Nampak, which has made big bets outside South Africa in countries, including Angola and Zimbabwe, said the beverage can market in Nigeria had surpassed pre-Covid-19 pandemic levels and that a higher grant from a customer had boosted demand.
“Our Nigerian operations exceeded expectations and delivered double digit revenue growth for both beverage cans and general metals packaging,” said the group.
Nampak said the turnaround was not only marked in Nigeria, but also in South Africa’s food division which was restructured and the plastic segment.
However, the alcohol ban had impacted South Africa’s demand. The group said beverage can volumes in South Africa had still not recovered to pre-Covid-19 levels and Bevcan South Africa revenue inched higher due to export contracts.
“Softer demand caused by restrictions on large group gatherings and sporting events, compounded by the impact of the five-week long third alcohol ban, have resulted in lower sale volumes in South Africa,” said Nampak.
The company said supply of beverage can bodies to North America had commenced in December 2020, and an export contract for up to 400 million can ends was secured with supply having commenced in February this year.
Nampak said owing to the constrained economy, weak demand for beverage cans persisted in Angola, with Covid-19 pandemic restrictions and the shutting of borders exacerbating the situation.
Double digit growth in Nigeria saw the metals division revenue extending by 3 percent with modest growth from Bevcan South Africa and DivFood. Revenue growth was pulled back by ongoing weaker demand in Angola.
In terms of plastics, revenue was at R1.4bn and Plastic South Africa’s performance was in line with expectations. The group withheld its interim dividend.
Despite a weak trading environment it managed to improve profitability.
Revenue for the period was flat at R6.5bn, remaining unchanged while operating profit surged by 89 percent to R543 million, and its trading profit improved by 11 percent to R706m.
The share price rose 1.03 percent on Friday to close at R2.94.