No dividend for Nampak — again
The listed packaging manufacturer says liquidity problems in its Zimbabwe operations and delays in the sale of its glass business have forced it into cash-preservation mode
Nampak shareholders will wait longer for dividends as Africa’s largest diversified packaging manufacturer has taken a cautious stance amid continued liquidity problems in Zimbabwe and the delayed sale of its glass business.
Currency volatility and unfavourable macro-economic conditions in the key South African, Angolan and Zimbabwean markets have pushed the company into cash preservation mode.
“There are better ways to return cash to shareholders,” Nampak CEO André de Ruyter said, when asked about the company’s decision not to declare a dividend in the six months to end-March. These included using proceeds from the looming sale of its glass business to pay a special dividend, he said.
The company suspended dividends in 2016. That was part of its plans to improve its financial position in light of high debt levels arising from aggressive capital expenditure, as well as liquidity problems in some African markets.
Nampak said it would not pay dividends “until the sustainability of cash transfers from Zimbabwe is assured and the disposal of the glass business is finalised”.
As various factors continued to weigh in on the company’s performance in the first half of the 2019 financial year, it decided against paying dividends.
“The first half of 2019 has been challenging for a number of key businesses at Nampak. Significant currency volatility and difficult macro-economic conditions, particularly in Angola, have held back performance. Pedestrian economic growth in other African countries, most notably SA , has depressed consumer demand and volume growth,” De Ruyter said.
But he said Nigeria was an exception to the trend as Nampak reported significant increases in beverage can volumes in the West African country.
“Beverage can volumes in Nigeria are at a record high, demonstrating the resilience of the Nigerian consumer market after a recession,” De Ruyter said.
In Angola, beverage can volumes came under pressure as the kwanza devalued by 49% since March 31 2018. This eroded disposable income and put consumption under pressure, he said.
In Zimbabwe, the rand value of Nampak’s cash balances plunged to R466m, from R1.2bn at the end of September 2018, as the country’s currency devalued. The company earlier in 2019 expressed optimism that the introduction of a new currency in Zimbabwe would ease liquidity problems.
“Regrettably, that has not happened. Liquidity is still an issue. In the six months to end of March, we only expatriated R27m. That is disappointing,” he said.
De Ruyter said the company was not concerned about risks in Zimbabwe because volumes in that country continued to grow and its operations there were self-sustaining.
“The performance in terms of volumes has been good,” he said. The company had no intentions to give up on Zimbabwe. We have good assets and good people there. Continued presence in Zimbabwe does not add to our risks,” he said.
Nampak said negotiations on the disposal of the glass division were ongoing with a South African majority-black-owned business, which has secured funding for 100% of the anticipated divestiture value.
“Commercial negotiations are proceeding well, and upon conclusion the transaction, if concluded, will be submitted to the South African competition authorities for approval,” it said.
De Ruyter declined to give a timeline for the conclusion of the transaction.