Our opinion on the current state of NAMPAK(NPK)

Nampak (NPK) is Africa's largest packaging company, operating primarily in South Africa and ten other African countries. While 60% of its turnover originates in South Africa, the country contributes only 36% of its trading profit. The rest of Africa accounts for 59% of trading profit and 31% of turnover. Nampak also has a smaller presence in the UK and Ireland. The company produces four types of packaging: plastics, metals, paper, and glass, with the majority of trading profits coming from metals, mainly beverage cans.

Nampak has successfully repatriated R3.5 billion (US$265 million) in surplus cash from Zimbabwe, Nigeria, and Angola, showcasing its management's ability to return profits from its African operations. After writing down its Angola and Nigeria businesses by R3 billion, the company halted its African expansion strategy. COVID-19 and the drop in oil prices have impacted its results in Nigeria and South Africa.

Initially, Nampak aimed to raise R2 billion through a rights issue to repay its nearly R6 billion debt. However, the rights offer was reduced to R1.5 billion, with final approval to raise up to R1 billion on 30th June 2023. Despite reducing the rights offer, the announcement caused a 30% drop in the share price.

In its financial results for the year ending 30th September 2023, the company reported revenue down by 2% and recognized a significant foreign exchange loss of R1.2 billion. The report showed net impairments totaling R2.8 billion, which included goodwill impairment in Bevcan Nigeria (R1.5 billion), asset impairment in Bevcan Angola (R827 million), DivFood asset impairment (R290 million), and Rigids impairment (R175 million). These impairments accounted for 61% of the group's previously reported shareholders' equity of R4.7 billion. The company experienced an attributable loss of R4 billion, resulting in a headline loss of R468.11 per share, compared to a profit of R75.89 per share in the previous year. The net asset value fell to 19,810 cents per share from 183,723 cents.

In an update for the quarter ending 31st December 2023, Nampak indicated improved operational and trading performance in Bevcan SA and DivFood through margin management, cost reduction, and efficiency gains. Bevcan Angola saw a volume recovery, and reduced forex losses contributed to a better operating profit.

The share, which once peaked at over R45 in November 2014, became a penny stock before a 250-for-1 consolidation on 26th July 2023. The company is seen as recovering, but its vulnerability to economic and political developments across African countries makes it a risky proposition, especially after recent challenges faced by other firms like MTN in Nigeria.

On 20th April 2023, CEO Eric Smuts resigned, and Phil Roux took over. Investors are advised to wait for the share to break through the downward trend following the rights issue on 6th September 2023. On 9th May, the company announced that it would publish its interim results for the six months ending 31st March 2024 on 28th June 2024, following a "cyber incident."