Nampak: Broadening African horizons

The past 12 months has proved an exceptionally busy period as Nampak has looked to reorganise its business. Expansion into Africa has appeared to be a major focus for this South African business, as it has sold assets and funded new projects across the Continent.

The company has long been held as a leading provider of packaging solutions, as the website describes:

“We offer the most comprehensive product range, across multiple industries throughout Africa, manufacturing to the highest commercial and environmental standards in metal, glass, paper and plastic.

shutterstock_115657339“A positive customer experience is made possible by our large geographic footprint, extensive value-added services, large infrastructure, significant capacity to deliver, one of the world’s leading packaging research and development facility and a proven innovation process.”

Whilst the company is headquartered in Sandton and it can trace its roots back to the 1920s when cardboard boxes were being made by a number of entrepreneurs. Over the next few decades business developed and a number of companies grew in strength and in 1968, Nampak was formed (National Amalgamated Packaging) as a result of acquisitions. Soon afterwards the business listed on the Johannesburg Stock Exchange.

In the subsequent years the company has continued to grow and diversify with a series of acquisitions which have increased Nampak’s capabilities and geographical footprint, leading to the packaging giant of today.

Of course maintaining market position is a challenge, particularly in a tough economic environment and recent years have seen changing demands for Nampak’s goods and services.

Last November it was reported that Nampak had announced the sale of its paper business to Ethos Private Equity on behalf of the Ethos Fund IV. The R1.575 billion cash transaction included Nampak’s corrugated, sacks and tissue divisions, but excluded its shareholding in Sancella and its recycling business.

Nampak said in a statement that it intended to utilise the proceeds of the transaction for its expansion plans in the rest of Africa, underlining a trend prevalent in a number of South African businesses at present.

At that time, Nampak CEO Andre de Ruyter said the group had a strong year and made good progress with unlocking value from its base business and accelerating its growth in Africa.

De Ruyter highlighted the commissioning of a third glass furnace at its Roodekop plant, the sale of the cartons and labels division and the conversion of the beverage can lines in Springs to aluminium as signs of the realignment taking place, while group had also improved its B-BEEE rating to level 3.

“With the outlook for South African economic growth modest at best, Nampak is putting a strong emphasis on rigorous management of factors under its control. Already established as the packaging leader in Africa, with operations in 11 African countries beyond South Africa’s borders contributing more than a quarter of trading profit, we continue to focus on taking advantage of Africa’s upward growth trajectory,” de Ruyter said.

shutterstock_182989115The significance of the change in geographical focus is understandable, given that during the same period trading profit from the rest of Africa increased by 25 per cent from R495 million to R616 million due primarily to the contribution of Bevcan Nigeria and the continued good performance from the Angolan beverage can operation.

Net borrowings increased by R4.6 billion year on year following the acquisition of Bevcan Nigeria and the capital expenditure invested in various projects during the year.

Bevcan and DivFood benefitted from volume growth and good cost control. Lower selling prices agreed by the metals and glass divisions to secure long-term supply contracts also had an impact, De Ruyter commented.

In August of last year, reports came through that the company was contemplating doubling the capacity of its Nigerian beverage can factory to meet fast-growing demand in Africa’s biggest economy.

Nampak had paid more than $300 million for Lagos-based can maker Alucan earlier in the year, a business which competes with unlisted GZ industries and imports, and has the capacity to make 1.1 billion cans a year.

“We have the ability to double the capacity of that facility with relatively modest incremental investment and we are seriously considering that,” Andre de Ruyter, chief executive officer told Reuters in an interview at the time. “I am quite bullish on the Nigerian market. It is Africa’s largest economy it is showing rapid economic growth.”

The Nigerian beverage can market, which is about 1.5 billion cans per annum, is expected to grow rapidly as rising incomes encourage consumers to switch to factory-made beers and soft drinks. Global brewers such as SABMiller and Heineken NV are setting up or increasing their capacity in the country.

Nampak, which operates in more than a dozen other African countries that include Kenya, Zambia and Mozambique, also recently installed an extra production line at its Angolan can manufacturing plant.

Whilst operations remain within South Africa, De Ruyter remains positive for the future and sees further growth across the Continent:

“We are very keen to grow our African footprint and we will be looking at potential further acquisitions and green fields projects,” he said.

“We are pursuing our strategic objective to accelerate growth in the rest of Africa to ensure that this contributes to sustainable earnings in the longer term.”