Nampak eyes share buyback as sale of glass business nears
The diversified packaging manufacturer rules out a special dividend payment
Nampak, Africa’s largest diversified packaging manufacturer, said on Thursday it might use proceeds from the sale of its glass business to buy back shares from shareholders.
The company, which is facing a tough economy at home and liquidity problems in Zimbabwe, among other things, said it was in the final stages of negotiating the sale of the business. The deal is likely to be finalised by the end of September.
In February, Nampak entered into an exclusivity arrangement with an unnamed preferred bidder, a black South African-owned company backed by a large international corporation with glass expertise.
“We are in the final stages of negotiations with the buyer and expect these to be concluded by the end of the financial year,” the company said.
The decision to sell the glass business followed what the company said were a number of years of disappointing performance.
Nampak said the transaction would enable it to focus on the metals business, which generates more than 60% of the company’s trading profit. It said proceeds from the sale would be used to reduce the company’s debt.
No special dividend
The company has, however, ruled out a special dividend payment. “We do not anticipate declaring a special dividend once the proceeds are received and are considering other ways of returning cash to shareholders including buying back shares,” the company said.
Nampak suspended dividends in 2017 due to a lack of liquidity in Nigeria and Angola owing to the collapse in the oil price, which created shortages in US dollar currency in oil producing countries.
“In turn, this resulted in limited liquidity as Nampak was not able to transfer profits generated in these countries. This situation is correcting itself, and during the past financial year, Nampak was able to transfer R4bn from Angola and Nigeria over the past twelve months up to March 2019,” Nampak said.
The company said gross domestic product (GDP) growth and consequently market demand has declined in Angola as a result of the devaluation of the kwanza against the dollar.
As a result, producer price inflation in Angola has increased, driving up the consumer price index (CPI). On the other hand, strong demand for beverage cans has resulted in record production levels for Nampak’s business in Nigeria.
“(In order) to take advantage of the positive growth trends in Nigeria, Nampak is investing R100m into a new food can line in Lagos to be commissioned in 2020,” Nampak said.
Nampak said the transaction, which is classified as a large merger under the South African Competition Act, would be referred to the Competition Commission for consideration, and would become final once the commission’s ruling was received.