Marc Hasenfuss Editor-at-large
Picture: CONSOL
Picture: CONSOL

The JSE’s small packaging sector will be reinforced by the confirmation on Thursday of glass packaging company Consol’s long-awaited return to the stock exchange.

Consol, which has investment house Brait as a major shareholder, looks set to raise substantial capital on listing to execute growth plans in SA and selected African markets.

Consol was delisted from the JSE in 2007 when it was bought out by a consortium of private equity investors, including Brait Private Equity and Old Mutual Private Equity.

Private-equity investors typically look to exit an investment in five to seven years, which meant the market had long expected either the sale or relisting of Consol.

For investors there is not a great deal of financial information around Consol or its capital-raising plans in the intention to float notice. More detail is only expected to be released with the prelisting statement.

Consol said that it now aimed to use about R2.7bn of the net proceeds of the proposed listing to strengthen and deleverage its balance sheet.

Consol CEO Mike Arnold would not be drawn on Consol’s debt figure, but indicated that the intention was to bring gearing down to a more market-related level.

Consol said additional listing proceeds — the quantum of which will be determined later — would be used to repay a portion of the shareholder loans.

The balance of the shareholder loans will be swapped into shares when Consol lists.

Market watchers said on Thursday that it would be intriguing to see which backer Consol was most indebted to, with most speculating Brait, which holds a 29.7% stake in the company.

Other major shareholders include Old Mutual Private Equity (22.8%), Sanlam Private Equity (12%), Sphere (10%), HarbourVest Partners (9.8%) and the Public Investment Corporation (7.5%). The intention to float notice said certain shareholders might also sell additional shares to cover for overallotments of up to 15% of the total number of shares placed as part of the listing exercise.

Lentus Asset Management chief investment officer Nic Norman-Smith said it was an interesting time for Consol to relist, with JSE packaging firm Nampak having put its glass packaging operations up for sale earlier in the week.

“Nampak’s capital allocation has not been great in recent years, so perhaps their decision to exit the glass business can be taken as a contra-indicator for Consol’s prospects as a listed counter.”

The financial figures disclosed in the notice showed that in the six months to end-December 2017 Consol’s revenue and adjusted earnings before interest, depreciation, taxation and amortisation (ebitda) were R3.7bn (R3.5bn for the corresponding period in 2016) and R936m (R896m) respectively. For the financial year to end-June 2017 Consol’s revenue and adjusted ebitda were R6.2bn and R1.6bn respectively.

Consol packages mainly for large customers in the beer, wine, flavoured alcoholic beverages, nonalcoholic beverages, spirits and food segments.

Consol earns most of its keep from South African operations, but has expanded into Kenya and Nigeria, as well as being in the throes of setting up a new facility in Ethiopia.

Consol’s total manufacturing capacity is about 932,000 tonnes of manufactured glass a year. The notice said Consol was determined to leverage its leading market position in SA to enhance profitability and improve its South African margins as it pursues growth. This entailed maintaining a target adjusted ebitda margin of 26% to 28% over the medium term. Consol believed a strong market share in SA would allow the company to benefit from the local market’s volume growth potential of about 3% to 4% a year from 2017 to 2021.

Arnold said Consol’s development plans were for aggressive growth locally and through the rest of the African continent.

“We believe that by combining our competitive advantage and technical ability … we can open up exciting opportunities to create significant value for our future shareholders.”