• Performance was impacted by reduced demand, inadequate power supply, increased competition, and supply chain disruptions
• Zimbabwe experienced its worst drought in over 30 years
• Group revenue was down 23% year-over-year in USD terms, and trading profit declined by 56%

Harare-NamPak Zimbabwe Limited, a leading packaging firm listed on the Zimbabwe Stock Exchange (ZSE) has experienced a challenging first quarter ,October to December 2024 with only one of its operating units recording slight sales growth amidst a difficult economic and operational environment.

The company’s overall performance was significantly impacted by reduced demand across key segments, largely due inadequate power supply, intensified competitor activity and supply chain disruptions.

The Hunyani Paper and Packaging Division saw an 35% contraction in sales volumes due  to heightened competition within the commercial segment and a reduced carry-over of late-season orders from tobacco merchants, a direct result of the drought’s impact on tobacco crops.

Zimbabwe recorded one of its worst droughts in over 3 decades (30 years) and despite this , tobacco exports earnings reached an all time high of US$ 1.3 billion in 2024.

The Mega pack segment despite being the only bright spot for NamPak in FY2024 experienced a 13% decline in volumes compared to the same period last year.

This decline was attributed to intermittent power disruptions from the Zimbabwe Electricity Supply Authority (ZESA) leading to increased operational costs and a rise in plant breakdowns, stemming from the resultant stop-start production process.

In the period, there were chronic electricity blackouts of up to 18 hours in many areas forcing companies to rely on importing  generators for backup.

‘’This has negatively affected our efficiencies and we have installed additional generator capacity to ensure more efficient operations going forward.’’ Van Gend Group Managing Director said.

The CarnaudMetalBox segment also faced challenges, with sales volumes decreasing by 7%, reflecting the broader difficulties encountered by the company during the quarter.

This decrease was primarily due to a significant reduction in metals volumes, which have lagged behind last year's figures as a result of raw material shipping delays stemming from political unrest in Mozambique following the disputed election results.

Plastic volumes were slightly below the prior year, but this was largely a consequence of some customers facing liquidity challenges possibly due to the currency volatility and inflationary pressures, which temporarily affected their offtake.

The one silver lining was the Cartons and Labels Division that focuses on carton manufacturing and designs.

This unit experienced a 4% increase in sales volumes fuelled by a recovery in commercial sales possibly due to tobacco wrap volumes outperforming the previous year’s figures.

As a result of reduced demand across all business units, group revenue for the quarter, expressed in USD terms, was 23% lower than in the prior year period, while trading profit declined by 56%.

Looking ahead, ‘’the group continues to trade under a cautionary notice regarding the pending disposal of Nampak Southern Africa Holdings Limited’s shareholding in the Group to TSL Limited’’.

The prosed disposal upon fulfilment of the conditions is that TSL will acquire a 51.43% stake in Nampak Zimbabwe for $25 million.

According to the  circular released by the group on the 10^th of December , the bidder  accepted the deal, pending the conclusion of binding transaction agreements and necessary regulatory approvals.

Following the disposal, TSL is required to make a mandatory offer to Nampak Zimbabwe's remaining shareholders in terms of the Companies  and Other Business Entities Act (Chapter 24:31) and The Zimbabwe Stock (ZSE) listing rules. This offer can be settled in cash or through a share swap.

The acquisition is expected to have a positive impact on both companies, with TSL benefiting from in-house manufacturing of packaging materials and Nampak gaining accelerated growth, improved competitiveness.

 The $25 million acquisition price will be instrumental in expanding Nampak Zimbabwe's local operations and completing stalled projects.

This includes the acquisition of an eight-colour printer for self-opening paper bags from Bullpak, facilitating expansion and modernization. However, the acquisition remains pending legal approval.

Equity Axis News