Nampak CEO says group ‘not getting joy’ from retrenching workers
Leaner and meaner packaging group looks to further consolidate its operations to be fit for purpose
08 December 2023 - 05:00
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A worker lifts an aluminium can from the production line at the Nampak's Springs manufacturing plant. Picture: WALDO SWIEGERS/BLOOMBERG
Nampak has completed the first phase of its retrenchment process, costing the group R150m so far, with further plant consolidations in the pipeline as the debt-laden group ramps up its cost-containment efforts.
CEO Phil Roux said at the group’s annual results presentation Nampak had completed phase one of its planned section 189 process at the end of August with phase two under way in a move set to “significantly” reduce the company’s manpower costs.
The packaging manufacturer in May told shareholders of inevitable job cuts, salary freezes and a reduction in overtime as it battles a cash crunch that has eroded its share value over the past five years.
On Thursday, Roux told Business Day that the second phase of retrenchments were scheduled to take place in February.
“We are in a three-stage process — currently negotiating phase two,” Roux told Business Day. “We are not divulging numbers. We would like to note that we get no joy from retrenching.”
Nampak has also merged two divisions — BevCan and DivFood — as it works to simplify its structure and draw on efficiencies to turn around the company’s fortunes.
The CEO said after a tremendous lot analysis Nampak would be similarly looking at its other operations and changing some of its manufacturing architecture, which he described as “lumpy, unwieldy and unsustainable”.
“So we will be closing operations; in fact we have announced the closure of one part of the business in our Mobeni operation,” Roux said, referring to the KwaZulu-Natal-based asset.
“And the likelihood of plant consolidation, some in 2024 financial year and some in 2025 financial year, will be materialising and that gives you a complete step change in profitability.”
The group’s capital and financing structure was strengthened through the successful rights issue of R1bn where it raised R960m, after transaction costs in September.
However, it said net finance costs in the year to end-September had jumped by 109% to R1.2bn from R586m, including lender advisory costs of R335m.
Moreover, higher foreign exchange losses, net impairment losses and finance costs cast a shadow on its financial results.
Nampak reported later that it had swung into a net loss of R4bn during the reporting period versus the R26m it lost in the previous matching period. a year ago.
Roux said the most serious risk facing Nampak in the short term is dwindling volumes. The company reported volume reductions in Bevcan Nigeria, Plastics SA and DivFood in the period coupled with intensifying competition.
However, he assured investors that the cost-containment actions and the R350m investment into the turnaround of the Bevcan Springs Line 2 would reap benefits as it would increase capacity to meet the growing demand for pack formats.
“We are not, however, deer in a set of headlights and [are] responding with appropriate mitigation and actions and we are building cultural grit,” said the CEO. “Our phase out and scale down initiatives will succeed ... our competition must enjoy eating our lunch in the short term.”
Chronux Research analyst Rowan Goeller said after being the only bevcan (beverage can) producer in SA for some time, the company is now contending with two new competitors that have built bevcan lines in recent years.
The likes of Hulamin, GZ Industries and CanIt have taken a bite at the lucrative beverage can market.
Goeller said while new competitors reduced Nampak’s market share and expedited the closure of the Durban and Cape Town lines, Nampak has continued to be a reliable producer and customers are starting to come back after disappointments with the new entrants.
“Nampak has an advantage over its competitors having multiple lines as it can run dedicated can size runs for longer,” said Goeller. “At present, the conversion of Springs Line 2 to larger can sizes is an option given the shortage of supply currently for that type of can.”
Meanwhile, the R1.3bn JSE-listed manufacturer said net debt had decreased 12% to R4.6bn from R5.2bn in the year, with plans to work the debt down even further.
In line with the criteria in the new funding package, Nampak is required to raise R2.7bn through asset disposal in the next 18 months to repay interest-bearing debt
CFO Glen Fullerton said the group’s R1.9bn historical debt has now been housed in a separate facility and would be maintained and settled through asset disposal proceeds over the next year and a half.
“That’s taken significant pressure off the covenant compliance,” said Fullerton. “We’ve reduced the fixed cost base in the business, we’ve merged two businesses, we’ve downscaled the size of our head office and you will see some benefits coming through in FY24.”
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Nampak CEO says group ‘not getting joy’ from retrenching workers
Leaner and meaner packaging group looks to further consolidate its operations to be fit for purpose
Nampak has completed the first phase of its retrenchment process, costing the group R150m so far, with further plant consolidations in the pipeline as the debt-laden group ramps up its cost-containment efforts.
CEO Phil Roux said at the group’s annual results presentation Nampak had completed phase one of its planned section 189 process at the end of August with phase two under way in a move set to “significantly” reduce the company’s manpower costs.
The packaging manufacturer in May told shareholders of inevitable job cuts, salary freezes and a reduction in overtime as it battles a cash crunch that has eroded its share value over the past five years.
On Thursday, Roux told Business Day that the second phase of retrenchments were scheduled to take place in February.
“We are in a three-stage process — currently negotiating phase two,” Roux told Business Day. “We are not divulging numbers. We would like to note that we get no joy from retrenching.”
Nampak has also merged two divisions — BevCan and DivFood — as it works to simplify its structure and draw on efficiencies to turn around the company’s fortunes.
The CEO said after a tremendous lot analysis Nampak would be similarly looking at its other operations and changing some of its manufacturing architecture, which he described as “lumpy, unwieldy and unsustainable”.
“So we will be closing operations; in fact we have announced the closure of one part of the business in our Mobeni operation,” Roux said, referring to the KwaZulu-Natal-based asset.
“And the likelihood of plant consolidation, some in 2024 financial year and some in 2025 financial year, will be materialising and that gives you a complete step change in profitability.”
The group’s capital and financing structure was strengthened through the successful rights issue of R1bn where it raised R960m, after transaction costs in September.
However, it said net finance costs in the year to end-September had jumped by 109% to R1.2bn from R586m, including lender advisory costs of R335m.
Moreover, higher foreign exchange losses, net impairment losses and finance costs cast a shadow on its financial results.
Nampak reported later that it had swung into a net loss of R4bn during the reporting period versus the R26m it lost in the previous matching period. a year ago.
Roux said the most serious risk facing Nampak in the short term is dwindling volumes. The company reported volume reductions in Bevcan Nigeria, Plastics SA and DivFood in the period coupled with intensifying competition.
However, he assured investors that the cost-containment actions and the R350m investment into the turnaround of the Bevcan Springs Line 2 would reap benefits as it would increase capacity to meet the growing demand for pack formats.
“We are not, however, deer in a set of headlights and [are] responding with appropriate mitigation and actions and we are building cultural grit,” said the CEO. “Our phase out and scale down initiatives will succeed ... our competition must enjoy eating our lunch in the short term.”
Chronux Research analyst Rowan Goeller said after being the only bevcan (beverage can) producer in SA for some time, the company is now contending with two new competitors that have built bevcan lines in recent years.
The likes of Hulamin, GZ Industries and CanIt have taken a bite at the lucrative beverage can market.
Goeller said while new competitors reduced Nampak’s market share and expedited the closure of the Durban and Cape Town lines, Nampak has continued to be a reliable producer and customers are starting to come back after disappointments with the new entrants.
“Nampak has an advantage over its competitors having multiple lines as it can run dedicated can size runs for longer,” said Goeller. “At present, the conversion of Springs Line 2 to larger can sizes is an option given the shortage of supply currently for that type of can.”
Meanwhile, the R1.3bn JSE-listed manufacturer said net debt had decreased 12% to R4.6bn from R5.2bn in the year, with plans to work the debt down even further.
In line with the criteria in the new funding package, Nampak is required to raise R2.7bn through asset disposal in the next 18 months to repay interest-bearing debt
CFO Glen Fullerton said the group’s R1.9bn historical debt has now been housed in a separate facility and would be maintained and settled through asset disposal proceeds over the next year and a half.
“That’s taken significant pressure off the covenant compliance,” said Fullerton. “We’ve reduced the fixed cost base in the business, we’ve merged two businesses, we’ve downscaled the size of our head office and you will see some benefits coming through in FY24.”
gumedemi@businesslive.co.za
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