- Q3 performance was mixed: While overall volumes were up 2% , revenue declined by 10%
- Specific product lines struggled: Commercial carton, Tobacco paer wrap, HPDE segments saw a slowdown in demand
- Nampak is prioritizing cost control measures to improve profitability , boost growth
Harare- In a challenging economic landscape marked by volatile exchange rates, power outages, and ongoing liquidity constraints, Nampak Zimbabwe, a leading packaging firm says it will leverage on cost containment and operational efficiency to boost growth going forward.
This, the company believes will enable it to navigate difficult market conditions and maintain a strong position in the competitive packaging industry.
In a trading update for the third quarter ended 30 June 2024, the company said, “Power shortages, particularly at the Ruwa plant, affected operations, resulting in the increased usage of generators to meet customer demand.
Hence, “The operating environment remains uncertain given the ongoing liquidity challenges, and the Group will continue to focus on cost containment measures in order to preserve margins and improve profitability across all the businesses.”
During the third quarter, cumulative ZiG depreciation on the market-determined parallel market averaged 36%, 30%, and 45% in May, June, and July, while load shedding was at its peak averaging not less than 10 hours per day. Against a peak demand of nearly 2000 megawatts, the country is producing 1200 megawatts, with the output set to decrease further with the deterioration of water levels at Kariba Dam.
One key strategy which the firm can use is to emphasize value-based pricing, highlighting the quality, reliability, and sustainability of its products and services. This can justify higher prices and attract customers willing to pay a premium for these benefits.
Conversely, Nampak can strategically adjust prices for specific products or segments to maximize profitability based on market conditions and competitor pricing.
Beyond pricing, Nampak can optimize its operations through continuous process improvements. Implementing lean manufacturing techniques, automating processes, and optimizing supply chain logistics can significantly reduce waste and improve efficiency. These advancements can translate into a competitive advantage, allowing Nampak to offer more competitive pricing or achieve higher profit margins.
Nampak has strategically implemented generators to mitigate disruptions, ensuring production continuity and minimizing operational losses. Although this proactive approach safeguards production, there is also a need to optimize generator use, reducing fuel consumption and minimizing associated costs.
Q3 Performance
During the third quarter, Group volumes for the third quarter were 2% ahead of prior year with most of the product lines higher than last year except for HPDE and commercial cartons which were affected by a slowdown in demand and increased competitor activity.
Cumulative volumes for the 9-month period to June 2024 were 3% below prior year due to volume recoveries in the current quarter which have made up for the volume losses in the previous quarter, particularly in the paper cluster as well as in metals.
However, Group revenue for the 9 months to June was 10% down in USD terms compared to prior year. This was mainly due to FY23 benefiting from a record tobacco crop in Zimbabwe, compared to a drought year in FY24.
Unit Operations
Hunyani Paper and Packaging: Sales volumes for the third quarter were 2% down on prior year anchored by tobacco which was 4% ahead of the same period last year due to early season deliveries.
However, the commercial carton volumes were 19% down on prior year and have been affected by competition with lower price offerings.
On labels and Sacks Division, sales volumes for the third quarter were 3% down on prior year due to reduced demand for tobacco paper wrap. However, other commercial packaging was 7% up on prior year due to improved demand.
At Mega Pak, third quarter sales volumes were 11% up on prior year while CarnaudMetalbox were 4% down on prior year despite metals volumes being 21% ahead of prior year. Plastics volumes were 10% down on prior year on the back of liquidity challenges for some major customers.
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