Nampak fears supply chain disruption as full impact of COVID-19 remains uncertain

  • Potential changes in exchange rates, labour laws or policies could imoact cost of production
  • Delays in production or shipping of product likely to negatively affect future operating results and cash flows

Harare -Nampak Limited has expressed uncertainty surrounding supply chain disruption and travel bans as the COVID-19 outbreak continues to spread.

In a voluntary trading update for the five months to 29 February 2020, the Group said potential changes in exchange rates, labour laws or policies affecting the cost or supply of goods could negatively impact its cost of production and the timely availability of the desired amount of raw materials as a proportion of all materials used in its production is imported from foreign suppliers.

In addition, delays in production or shipping of product, whether due to work slow-downs, work stoppages, strikes, port congestion, labour disputes, product regulations and customs inspections, public health crises or other factors, could also have a negative impact on future operating results and resultant cash flows.

“If the COVID-19 outbreak continues and results in a prolonged period of travel, commercial and other similar restrictions, or a delay in production or distribution operations at any or all of our suppliers’ facilities, we could experience significant supply chain disruptions”, Nampak said.

The Group said while it continues to monitor the situation on a daily basis, it is currently unknown whether the outbreak will meaningfully disrupt its inventory shipments or meaningfully impact manufacturing at any of its suppliers’ plants.

“To date, based on discussions with various suppliers, we are not anticipating significant supply chain disruptions, however, should this situation change it is unlikely that we will be able to develop alternate sourcing quickly on favourable terms, if at all, which could result in increased costs, loss of sales and a potential loss of customers, adversely impacting margins and ultimately the results of our operations”, Nampak added.

In this regard, the Group said it has held a number of discussions with customers across the spectrum and to date, with the exemption of non-essential producers, the majority of essential goods producers have indicated an intention to continue production or supply of goods to the market while in some cases there has been increase in the demand for essential goods packaging.

Nampak added that the full impact of COVID-19 may have significant influence on demand in the days and weeks ahead which in turn will impact on profitability and consequently cashflows.

“The extent of the impact of COVID-19 on our business and financial results will depend largely on future developments, including the duration and spread of the outbreak and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted”, Nampak said.

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