By ETimes
Packaging manufacturer Nampak Zimbabwe says it continues to be profitable and anticipates a successful end to the fiscal year, but foreign currency sourcing remains a challenge.
Volumes, a key indicator of demand, increased across the group during the third quarter ending 30 June 2022. The Covid-19 lock-relaxation down played a role in this, in part.
“The increase in volumes was nevertheless negatively affected by inflation, and margins were under pressure due to increased competition,” John van Gend said in a trading update.
The company needs foreign currency to procure key raw materials to avoid interruptions in operations. On a monthly basis, the firm requires about US$3.5 million to cover its raw materials.
“The availability of foreign currency remains critical, as delays in settling allocations through the auction system were more apparent in the quarter where about US$2 million already allocated is still outstanding,” he said.
“Amounts of foreign currency for imports received from customers assisted in closing the gap.”
He said there are still supply chain imbalances and certain orders are being delayed as a result of supply chain inefficiency.
Its topline performance for the third quarter was 4% ahead of the prior year’s quarter. In terms of adjusted for inflation, total revenue for the nine-month period was up 18% over the same time last year.
“This is because of improved sales volumes and selling price adjustments for the period to date,” he said. Even though costs and gross margins were under pressure, the group nonetheless turned a profit.
An increase in debtors is mostly to blame for the rise in net working capital. At the end of the third quarter, the group had ZW$989 million in cash on hand.
“The higher balance is due to receipts from customer prepayments during the period. The majority of this balance will be applied to stockholding and the settlement of trade payables.”
On the individual trading companies, Hunyani Corrugated Division sales volumes for the third quarter were up on the prior period by 27%. The Cartons, Labels and Sacks business sales volumes for the third quarter were down on prior year by 35%, as demand for SO bags slowed down.
At Mega Pak, sales volumes grew by 12% compared to the prior period. Despite some signs of volume recovery, exports to the Democratic Republic of the Congo were down.
Sales volumes for CarnaudMetalbo in the third quarter were 8% above the same period last year.
The ZW$451.2 million in capital expenditure for the nine-month review period mostly pertains to projects started in the previous year or spares capitalised in accordance with IFRS rules.
He said the government’s tightening of the currency issue has improved the economy’s overall status.
“The order book is full and demand continues to accelerate, with the main problem being our inability to source sufficient foreign currency for the importation of raw materials,” he said.
“Although more needs to be done by the authorities to address the macroeconomic challenges faced by businesses, the group remains profitable and predicts a strong finish to the financial year-end, provided that current trends continue.”
On the ZSE, the Nampak share is trading at ZW$9.62 and has a YTD of-13.71% – Harare