Forex shortages still the ‘main’ concern for Nampak despite introduction of the foreign exchange auction

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  • Allocated forex is insufficient to meet imported raw material requirements
  • Lower sales volumes across all sectors of the business
  • Revenue boosted by inflationary price increases

Harare – Nampak Zimbabwe Limited’s operations continues to be depressed due to the shortages of foreign currency in Zimbabwe which are limiting the company’s ability to import essential raw materials for production.

Nampak manufactures and markets packaging products which includes paper, plastic and metal packaging. It also has interests in leasing biological assets and a timber processing plant. Subsidiaries in the Paper division includes Hunyani Corrugated Products Division, Hunyani Cartons, Labels & Sacks Division, Hunyani Management Services Division, Hunyani Forests Limited, Hunyani Properties Limited and Softex Tissue Products (Private) Limited.

Other subsidiaries include MegaPak Zimbabwe and CarnaudMetalbox Zimbabwe Limited operating in the plastics and metals segment; and companies manufacturing corrugated containers and specialised packaging for the tobacco, horticultural, flori-cultural and citrus industry for local distribution and export.

In a trading update for the year ended 30 September 2020, Group Managing Director John Van Gend noted that foreign exchange shortages were alleviated to a large extent by the introduction of the foreign exchange auction system where the official exchange rate between the US dollar and the Zimbabwe dollar has stabilised at about ZWL$81 to USD1, but it is still not enough to meet the Group’s foreign currency needs.

“Despite this, the allocated foreign exchange is insufficient to meet all the imported raw material requirements needed to facilitate efficient production schedules,” he said.

Over the period, inflation remained at a reduced rate of increase. Power supply improved during the year, reducing the Group’s dependence on generators, while fuel supplies remained constrained.

“Despite some alleviation as mentioned above, the foreign exchange shortage remained the Group’s main concern, especially in respect of paper for conversion into corrugated boxes for the commercial and tobacco sectors,” Mr Gend said.

Hunyani Paper and Packaging sales volumes for the full year declined by 28% compared to prior year attributed to the tobacco case market where the local tobacco crop output was significantly down on the prior year and the delayed start of this year’s tobacco marketing season due to Covid-19 concerns.

Likewise, Mega Pak sales volumes declined by 12% against prior year mainly due to constrained consumer demand in the preforms market, in the first half of the year. Local volumes have however picked up in the last quarter of the year.

CarnaudMetalbox sales volumes also declined by 34% compared to the prior year.

“The shortage of foreign exchange and reduced disposable incomes in the first half of the year impacted demand,” Mr Gend said adding that there was increased product demand in the 4th quarter, as access to foreign exchange improved through the foreign exchange auction system.

Mr Gend highlighted that Group revenue and trading income results, being expressed in Zimbabwe dollars, were significantly up in all three operating units, boosted by inflationary price increases.

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