By Michael Tome
PAPER and packaging group Nampak Zimbabwe says its trading profit for the nine months up to June 30, 2019 was ahead of prior year pulling through in an environment characterised by severe economic headwinds.
The profit margins come at a time when volumes uptake were subdued across all sectors of the business except for tobacco packaging which was bolstered during the year by export sales to Malawi.
Sales for the group finished the three-month period above prior year, attributed to inflationary pressures which resultantly boosted prices, especially by the conversion of export earnings at new interbank rates.
Hunyani revenue increased by 116 percent compared to the prior year translating to significant trading income although volumes remained the same as in 2018.
The Corrugated Products Division benefited from higher local and export tobacco box orders but continued to face competition in commercial packaging.
MegaPak revenue was up 69 percent on last year with a significant improvement in trading income while volumes declined by 26 percent due to dampened demand from the beverage and cordials sectors and raw materials supply challenges.
Its other subsidiary CarnaudMetalbox revenue increased 78 percent in the period under review compared to last year’s performance again in an environment where volumes uptake weakened by 18 percent compared to the prior year as raw materials supply was constrained by the illiquidity in the market.
In a statement accompanying the trading update for nine months to June 2019, Nampak company secretary Keith Nicholson bemoaned the persistent lack of foreign currency and crippling power shortages as shortcomings to meaningful productivity by the company.
“The continuing scarcity of foreign exchange coupled with rising inflation presents a major challenge to the Group.
“Near-crippling power shortages are having a severe impact on production schedules, necessitating increased use of generators and adaptation of working hours at the plants, partly to night shifts, to utilise electricity when it is available,” said Mr Nicholson.
The company carried forward capital projects of $2,1 million, from the prior financial year, largely on replacement machinery which were wholly funded internally.
Nampak also highlighted that its capital expenditure programmes remain curtailed following the suspension of all credit
extensions and capital injection by the majority shareholder, Nampak Limited of South
In the outlook Nampak pointed out urgent need to resolve macro-economic essentials for a meaningful transition into an environment that has manageable challenges.
Nampak said; “The economy is facing strong headwinds it is unlikely that any meaningful relief will be forthcoming to the manufacturing sector until the critical constraints are eased.”