Inflation triggers Nampak profit warning

  • Forthcoming financial year results reflect a difference in excess of 20% from the previous year
  • Volumes down across all segments
  • Shareholders urged to exercise caution when trading

Harare – Listed diversified packaging manufacturer, Nampak Zimbabwe Limited has issued a profit warning for the financial year to 30 September 2019 as is required by Statutory Instrument 134 of 2019 and has advised shareholders to exercise due caution in the trading of their shares.

Statutory Instrument 134 of 2019: The Revised Listing Requirements of the Zimbabwe Stock Exchange stipulated, under Section 32 thereof, that a profit warning must be issued if the results for the next reporting period would differ by at least 20% from the previous reporting base.

In a trading update for the first quarter ended 31 December 2019, Nampak said, “While the Group’s business remains positive, the effects of inflation and currency depreciation since the introduction of the Zimbabwe dollar, as well as the requirement for results to be adjusted for hyper-inflation impacted the forthcoming results for the financial year ended 30 September 2019 and these will reflect a difference in excess of 20%.

“Shareholders are therefore advised to exercise due caution in the trading of their shares.”

The group registered declined volumes across all its segments despite good demand across the product portfolios.

Volumes at Hunyani Paper and Packaging were down on the prior year period by almost 38% due to the decline in the tobacco sector which was also down by 47%. The tobacco sector’s decline was as a result of late orders being received for the 2018 tobacco growing season, which boosted the early sales in the 2019 financial year comparative period.

The company also said volumes in the commercial segment were 14% below the prior year period due to imported raw material sourcing challenges and reduced consumer spending.

In the plastics and metals segment, volumes declined by 31% compared to the prior year owing to consumer demand contraction in the beer beverage sector while there was some recovery in the cordial sectors. Nampak also said the sourcing of raw materials remained challenging due to foreign currency shortages.

CarnaudMetalbox volumes plunged by 35% as they were affected by the migration to cheaper alternatives in the dairy sector while Metals were affected by the shortage of tinplate. The decrease was off-set by improved volumes as demand for scud containers and closures increased.

The group’s capital expenditure of $1.2 million relates mainly to projects carried forward from the prior financial year though capital expenditure programmes remain curtailed due to the lack of foreign exchange required to fund projects.

On the outlook the company said, “We continue to hope that the much needed macro-economic and political reforms can be accelerated in order to attract foreign direct investment support.”

The publication of the Audited Financial Statements for the year ended 30 September 2019 was delayed due to the requirement for compliance with International Accounting Standard (IAS29) regarding financial reporting in hyperinflationary economies. The company has been granted an extension of time for publication by the Zimbabwe Stock Exchange until 29 February 2020, by which time the Audited Results will have been published in the press.

“The Annual General Meeting is now scheduled for Thursday 26 March 2020.” said the company.

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