Nampak’s share price increased by up to 14 percent yesterday morning after the biggest packaging manufacturer on the continent said it had reached agreement with its funders to again extend by six months the terms of its debt obligations.
“Shareholders are advised that Nampak’s funders have agreed to extend the date by which the company is required to reduce net interest-bearing debt by R1 billion, either through asset disposals or a combination of asset disposals and an equity capital raise, to April 1, 2023,” a statement said.
The share price closed 7.26 percent percent higher at R2.50, but it is still well off the R10.92 that it traded at three years ago, and R19.78 five years ago.
The extension will effectively align the debt reduction date with the maturity date of the revolving credit facility, a statement said.
Nampak, the leading manufacturer of beverage cans in South Africa, Angola and Nigeria, and which also produces plastic and paper packaging products from many sites in South Africa and in 10 African countries, turned around from a loss to a profit in its 2021 financial year after its management focused on reducing financial risk to the business.
The latest positive development on the debt follows the recent release of strong financial results for the six months to December 31, after robust trading conditions overcame supply chain and other challenges, and profit increased by 87 percent to R321 million, while headline earnings per share was up by 102 percent to 35.6 cents per share.
At that stage net interest bearing debt per covenants of R5 billion had increased by 9 percent during the interim period – an additional R433m was drawn during the period to partially fund increased working capital requirements and improve cash reserves.
Nampak’s Board has for now decided not to declare dividends until debt is at a more sustainable level.
Yesterday’s announcement marks the second time the terms had been extended. Attempts last year to sell some of its assets failed due to the tough market conditions, bar its Tubes business that was sold, and the debt terms had been extended to September last year.
Operationally, the group is anticipating growth in demand for 440ml and 500ml cans to continue, as well as increased consumer demand for 300ml slender cans.
The move away from single-use plastics and towards aluminium beverage cans and liquid cartons made from paper was expected to accelerate. Competitive pressures were expected to remain tough in South Africa this year.
BUSINESS REPORT