Nampak Zimbabwe Limited is a Zimbabwean based packaging company mainly engaged in the manufacturing of paper, plastic and metal products. The company is listed on the Zimbabwe Stock Exchange. They are also into leasing biological assets and timber processing. The paper segment of the business includes Hunyani Corrugated Products Division, Hunyani Cartons, Labels and Sacks Division, Hunyani Management Services and Softex Tissue Products (Private) Limited. . The plastics and metals segments includes Mega Pak Zimbabwe and CarnaudMetalbox Zimbabwe Limited. Nampak Zimbabwe Limited is the local unit of the South Africa’s packaging giant Nampak. Both Nampak and Nampak Zimbabwe Limited have recently released they Annual Results which show a very strong and promising performance. We unpack Nampak Zimbabwe Limited.
Shareholding
Nampak Zimbabwe was created by the merging of the related packaging entities MegaPak, Hunyani and CarnaudMetalbox (CMB) in 2014 with the new entity taking over Hunyani Holdings’ stock exchange listing.
It is not a coincidence that Delta Corporation owns a 22.6% stake in Nampak Zimbabwe Limited. They are one of the major consumers of products coming from Nampak Zimbabwe Limited. On the other hand, Nampak owns 51.4% in Nampak Zimbabwe Limited. This is a company which owns businesses in South Africa, Nigeria, Angola and the United Kingdom. The obvious advantage with this arrangement is that Nampak Zimbabwe Limited will benefit in terms of strong export markets and exploitation of synergies among these entities. We already know that Nampak has previous given shareholder loans to Nampak Zimbabwe and such a relationship fosters the above mentioned synergies.
Nampak Zimbabwe Limited’s business units
The company has three major business units and below we explore each of them:
1. Hunyani Paper and Packaging
Hunyani produces products which include corrugated containers, general folding cartons, laminate cartons, high quality labels and various sacks and bags. They are a major supplier of double-wall board cases for local and export markets. Hunyani serves various markets which include cigarette and tobacco, agriculture, pharmaceutical, beverage, construction and industrial. In terms of performance in 2018, there has been a rise in demand for commercial packaging and this has been the major contributor to an increase in volumes and net revenue according to the Annual Results released recently. In addition, overhead cost containment measures and higher volumes led to higher operating profit than that recorded in 2017.
2. CarnaudMetalbox
This is a specialist supplier of metal cans, crowns and aerosols. They supply roll-on pilfer-proof closures for both local wine and spirit brands in Zimbabwe as well as tinplate pry-off crowns which are exported to neighbouring countries. CarnaudMetalbox also manufactures two and three piece built up and drawn cans and three piece food cans and metal ends. Their markets include food and dairy, alcoholic and non alcoholic beverages, edible oils, cosmetics and insecticides. The performance of this business unit has been impressive, boosted by recovered demand. Operating profit was substantially high as well.
3. Mega Pak Zimbabwe
Mega Pak produce a diverse range of plastic products which include crates, tanks, bottles, drums and closures. Their specialisation in blow moulding, injection moulding, rotational moulding as well as stretch blow moulding keeps them ahead of the pack in terms of packaging technologies. They operate two plants in Ruwa. Apart from local markets, the company also exports within SADC and COMESA countries, Mozambique, Zambia and Malawi included. Mega Pak serves various markets, namely, edible oils, chemicals, detergents, water, beer and sorghum, alcoholic beverages, meat and poultry, cordials and paint. Their performance has been commendable with the 2018 Annual Results citing recovering demand from major customers, growth in exports to the Democratic Republic of Congo and capacity enhancement. Volumes, net revenue and operating profit was well ahead of 2017.
Nampak’s strategy
The mother company, Nampak’s operating strategy has two focus areas namely, accelerating African growth and unlocking further value from base business. In terms of accelerating growth the attention is on acquisitions in metals, glass and plastics, building a strong market base through exports and diversification of manufacturing to other Nampak products. Unlocking value will include business process improvements, working capital management and stringent cost management among other things. This looks like exactly what is needed to drive further growth in Nampak Zimbabwe Limited. After noting that liquidity remains a challenge in Zimbabwe, Nampak decided not to extend any additional funding to operations like Nampak Zimbabwe Limited according to their Annual Results for 2018. This is on the back of previous shareholder loans which have already been rolled over. In other words this is a move to limit their exposure in Zimbabwe.
Performance
Nampak Zimbabwe Limited recorded a revenue increase of US $116.8 million up from US $96.3million, a jump of 21.3%. Profit also increased by 89.3%, moving from US $7.6 million to US $14.5 million. This impressive performance has been attributed to tight cost control measures, volume growth, improved product demand (owing to a good tobacco season) and a surge in exports to Central Africa. This is according to the 2018 Annual Results. Its is important to note that the business is investing in the future. There has been a capital expenditure of US $8.3 million for the installation of a new PET blower. At CarnaudMetalbox the expenditure included new moulds for the 1.5 litre Chibuku bottle, closures and upgrades to the food can line in order to improve can stackability. This is a sign of a healthy company poised for further growth
