• Volumes declined 5% YoY on customer in-sourcing and PET preform competition, only partly offset by stronger tobacco and HDPE demand, second consecutive year of contraction
  • Trading income fell 34% and revenue 8%, but cash balances surged 264% to US$6.76 million and free cash flow yield reached ~20%
  • Reported profit jumped 349% and EPS rose 56% due to non-recurrence of IAS 29 monetary losses and lower tax; normalised earnings showed only modest improvement

Harare- Nampak Zimbabwe, the country’s dominant packaging manufacturer, delivered a classic tale of top-line pressure and bottom-line resilience for the financial year ended 30 September 2025. Group sales volumes declined by 5% year-on-year, extending a mild downtrend that began in FY2024, while revenue fell by 8% from US$101.28 million to US$93.16 million.

Yet beneath the surface, the company engineered a remarkable financial transformation: year-end cash balances surged by 264% to US$6.76 million and the balance sheet emerged stronger and more liquid than at any point in the past decade.

The volume contraction was driven by two structural shocks. In the commercial carton segment, several large customers invested in their own folding-carton lines, triggering a sharp drop in third-party demand at Hunyani Paper and Packaging (volumes -3%). At Mega Pak, aggressive pricing from new entrants and persistent power outages in Ruwa combined to push plastics volumes down 9%, with PET preform sales particularly hard hit.

These losses were only partially offset by a larger-than-expected 2025 tobacco crop (which lifted cigarette-carton and related demand) and sustained growth in rigid HDPE containers for edible oils and agrochemicals. CarnaudMetalbox kept overall metal and plastics volumes flat, but the net result across the group remained a clear 5% decline. 

Trading income bore the brunt of the volume weakness and ongoing cost pressures, falling 34% from US$16.39 million to US$10.81 million. Encouragingly, the trading margin contracted by a relatively modest 460 basis points to 11.6% (from 16.2%), reflecting rigorous cost containment, lower polymer-price volatility, and the benefit of a more stable ZiG/USD environment compared with the prior year’s extreme volatility.

Reported profitability showed dramatic swings that require careful interpretation. Profit before tax declined 25% to US$11.21 million, but comprehensive profit attributable to shareholders leapt 349% from US$1.74 million to US$7.81 million, driving earnings per share up 56% to 1.03 US cents.

The primary drivers were the complete absence in FY2025 of the US$6.07 million net monetary loss recorded under IAS 29 hyperinflation accounting in the prior year and a materially lower tax charge. Normalised headline earnings therefore showed only modest improvement, confirming that underlying operational profitability remained under pressure rather than transformed. 

Cash generation was the undisputed highlight. Cash flow from operations before working capital movements rose 28% to US$13.56 million, and after working capital movements, operating cash flow increased 62% to US$8.94 million.

With capital expenditure held to a disciplined US$3.62 million (up just 3% year-on-year) and no dividend declared, free cash flow reached approximately US$5.3 million. The result, cash reserves swelled from US$1.86 million to US$6.76 million, the current ratio strengthened from 2.2× to 2.9× (up 32%), and net asset value per share climbed 28% to 4.73 US cents.

From a technical perspective, volumes remain in a confirmed bearish phase. The 5% decline in FY2025 follows a 3–4% drop in FY2024, producing a cumulative two-year contraction of roughly 8%. The five-year compound annual volume growth rate has slipped to -1.8%, and the 200-day moving average of monthly throughput is declining for the first time since the post-pandemic recovery. Support is consolidating around the -5% to -7% zone, underpinned by structurally resilient tobacco and HDPE demand, but overhead resistance at zero growth has proved impenetrable since early 2023.

Cash-flow and valuation metrics, however, are flashing deep-value signals. Free cash flow of US$5.3 million equates to a cash-flow yield of close to 20% at the current VFEX market capitalisation, placing Nampak among the highest-yielding industrial counters in southern Africa and well into the cheapest decile of its own 15-year history.

 Ooutlook for FY2026

Absent a major tobacco crop setback or renewed import surges, group volumes should stabilise in a narrow -2% to +2% band as the structural floor provided by tobacco and HDPE holds firm. Revenue is therefore likely to settle between US$91 million and US$96 million. Continued NEC wage inflation and intermittent power cuts may shave another 50–100 basis points off the trading margin, implying trading income of US$9.8–10.8 million and normalised headline EPS of 0.85–1.05 US cents. Capex is expected to step up modestly to US$4.5–5.5 million to bring new PET and HDPE lines on stream, but free cash flow should remain strongly positive at US$4–6 million.

Therefore, Nampak Zimbabwe exited FY2025 leaner, cash-rich, and defensively positioned. Volumes are down 5%, revenue down 8%, and trading income down 34%, yet the company sits on a fortress balance sheet with zero gearing and a 20% cash-flow yield. For patient investors, the story has shifted from growth to resilient cash generation in a difficult market, and on that metric FY2025 was a quietly impressive success.

The share price is likely to stay range-bound until volumes print at least two consecutive quarters of year-on-year growth, but the margin of safety has rarely been wider.

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