Our opinion on the current state of NAMPAK(NPK)Nampak (NPK) is Africa's largest packaging company, operating in South Africa and ten other African countries. While 60% of its turnover comes from South Africa, only 36% of its trading profit is generated there, with the rest of Africa accounting for 59% of trading profit from just 31% of turnover. Nampak has smaller operations in the UK and Ireland. The company produces four types of packaging products: plastics, metals, paper, and glass, with metals—primarily beverage cans—contributing the majority of its trading profits.
One of Nampak's key achievements has been its ability to repatriate profits from countries like Zimbabwe, Nigeria, and Angola, from which it has removed R3.5 billion (US$265 million) in surplus cash. Although Nampak has halted its African expansion strategy after writing down its Angola and Nigeria businesses by R3 billion, it has shown resilience amid challenges like COVID-19 and oil price declines, particularly in Nigeria and South Africa.
The company has faced significant debt issues, leading to a decision to raise R1.35 billion through a rights issue, which initially caused the share price to drop by 30%. Although the rights offer was reduced from R2 billion to R1.5 billion, shareholders ultimately approved raising up to R1 billion by 30th June 2023.
Leadership changes also marked a significant development, with CEO Eric Smuts resigning in April 2023 and being replaced by Phil Roux. In its financial results for the six months ending 31st March 2024, Nampak reported a 7% revenue increase and a sharp turnaround in headline earnings per share (HEPS) of 5,393.9c, compared to a headline loss of 11,027.3c in the previous period. Metals, despite declines in DivFood and Bevcan Angola, posted a 6% revenue increase, driven by growth in Bevcan South Africa, while Plastics and Paper saw 9% and 10% revenue increases, respectively.
On 1st October 2024, Nampak announced it had successfully refinanced the group with a significantly simplified funding structure, mainly funded by Standard Bank of South Africa with minimal foreign debt exposure. This followed the sale of its entire Nigerian operation for $68.5 million in May 2024, which triggered a clear on-balance-volume (OBV) buy signal. Another OBV buy signal followed on 20th June 2024 at R228 per share, with the share price rising to R447.74 since then.
Given these developments, we believe that Nampak is positioned to continue performing well, particularly as it benefits from a stronger balance sheet, operational improvements, and streamlined funding.