Financial capital

Our financial capital inputs are made up of cash generated by our operations and debt and equity financing. These funds are used to provide working capital to run our business and to finance both expansion and replacement capital expenditure. They are also used to pay interest on borrowed money and distribute dividends to shareholders, when appropriate. Our financial capital is reinvested in all the other capitals in a measured way to grow and sustain our business, after careful consideration of the returns they will generate.


Trade-offs in our use of financial capital

We sustain and grow our business with the use of financial capital and this has positive impacts on all the other capital stocks.By using financial capital to fund the installation of new equipment,at times we negatively impact on human capital when jobs are lost.The suspension of dividends over the past 18 months has improved our financial position but has been to the detriment,in the short term,of social and relationship capital.

  Key inputs

      2017   2016  
Market capitalisation R billion   12.1   13.4  
Total equity R billion   9.7   9.4  
Working capital R billion   2.3   1.9  
Capital investment R billion   0.7   1.4  
Net interest-bearing debt R billion   4.4   4.6  
Net interest incurred R billion   391.1   485.5  


      2017   2016  
Trading profit R billion   2.0   1.9  
Operating profit R billion   1.0   2.2  
Cash generated from operations before working capital R billion   2.4   2.3  
Cash generated from operations** R billion   2.1   2.8  
Net gearing %   45.0   49.0  
Earnings attributable to shareholders R billion   0.2   1.6  
Headline earnings per share Cents   123.8   107.6  
Dividends paid to shareholders* R million     576  
Return on net assets %   12.3   11.2  
Employment costs R billion   3.1   3.1  
Interest paid to providers of capital R million   391.1   485.5  
Earnings per share Cents   36.6   254.5  
* No dividend was paid for the 2016 financial year.The 2016 figure refers to the amount paid in respect of 2015.
** Refer CFO review – normalised cash generated before financing activities up 11%.

How we achieved these outcomes

  • Actively monitored liquidity issues in the Rest of Africa
  • Cash repatriation from Nigeria and Angola
  • Hedging against currency devaluation
  • Established a capital assurance committee
  • Tightly controlled the capital investment programme
  • Continued focus on the reduction of exposure to defined benefit plans
  • Focused on improving working capital
  • Daily cash management
  • Actively managed debt maturity profiles
  • Operations excellence programme
  • Reduction of interest-bearing debt



In pursuit of the delivery of our strategy,we continued our work in 2017 to tighten Nampak’s financial disciplines and create a platform for growth.To this end,we made further enhancements to the way we govern processes within the finance portfolio.


We formed a multi-disciplinary capital assurance committee to vet all capital projects – both proposed and existing. It ensures that Nampak’s capital programme is tightly controlled using a stage-gate model, evaluating capex requests through various stages. It critically reviews both the commercial and financial aspects of all capital projects, evaluating their assumptions. It also scrutinises projects after the capex has been allocated to see that these live up to their targets in terms of returns, and if not, why not?

The capital assurance committee makes Nampak’s process of capital allocation more rigorous, making it more difficult for operations to access capital. For all proposed capital projects, we require a return of 1.5 times the weighted average cost of capital (WACC). With a current WACC of 11.9%, the hurdle rate is 17.85%.

As a result of the work of this new committee, we have noted significant improvements in capex forecasts. In 2017, Nampak committed capex of R0.7 billion, down from R1.4 billion in 2016. The target for the year ahead is between R1.0 billion and R1.2 billion.

The cash management committee, in its second year of operating, focuses on the cash generation of each business unit. It requires each business to forecast daily cash movements for the following month, and overall expected cash movements in months two and three. As a result, we now benefit from a much improved correlation between forecast and actual cash flows, lending an “owner managed” feel to the business.

The head office cost evaluation committee meets once a month. It closely monitors all costs and ratios. This resulted in a further cut in head office costs in 2017 of R57 million. We continue to focus on optimising our working capital position, targeting an optimal working capital cycle that is facilitated by inventory being funded by trade payables, the funding by the group of high-quality trade receivables, and a focus on improving working capital velocity.

  Manufactured capital