Glass

Nampak Glass is one of two container glass manufacturers in South Africa and has a market share of approximately 25%. We operate three furnaces at our site southeast of Johannesburg and have installed capacity of 285 000 tonnes. Our bottles make up 18% of the beer, 25% of the flavoured alcoholic beverages, 21% of the wine and 67% of the spirits markets.

GLASS
Rob Morris
Rob Morris
Group executive: Glass
2017   2016   % change   
Key natural capital inputs
Energy use (GJ) 2 079 480   2 137 609   (2.7)  
Limestone (t) 32 700   36 600   (10.7)  
Silica sand (t) 133 965   133 139   0.6   
Soda ash (t) 36 027   39 312   (8.3)  
Outputs affecting natural capital
Emissions intensity (tCO2e/Rm revenue) 127.45   145.15   (12.2)  
Financial capital
Revenue (Rm) 1 420   1 323   7.3   
Trading profit (Rm) 63   105   (40.0)  
Trading margin (%) 4.4   7.9    
Human capital
Employees 433   435   (0.5)  
LTIFR 1.07   0.79   Deteriorated   
key development

Key developments

  • Maintained sales in a generally depressed market
  • Faced significant problems with quality of electricity supply
  • Grew market share in the wine sector
  • Incurred impairment of R321 million on goodwill and R114 million on intangible assets

 

 

SOUTH AFRICA

Nampak Glass had a challenging year, with operations disrupted by protracted problems with the quality of the municipal electricity supply to our site. Turnover rose 7.4% as we secured new sales in a subdued market but we reported a decline in our trading profit, as operations were impacted by a sustained period of volatile electricity supply and general disappointing operational efficiencies.

The group impaired R321 million which relates to the goodwill on the 2012 acquisition of the remaining 50% of Nampak Wiegand Glass (Pty) Ltd. The impairment was in light of the current trading conditions in Glass. A further R114 million was impaired in respect of intangible assets.

We continued to focus on safety, but our performance was disappointing, and was overshadowed by the death of a contractor on 1 October 2016 in a fork-lift truck accident.

The South African market for glass containers remained weak, with growth pedestrian at 1% to 2% a year, and demand well below the installed capacity of the country’s two producers. However, we increased our share in some sectors of the market, most notably wine, and continue to see opportunities for growth. In the second half, we secured new sales volumes to a large brewer. Our relationships with customers remained good.

Driven to deliver on the strategic imperative to improve business performance by buying, making and selling better, we continued to further simplify our manufacturing footprint. This entailed ongoing optimisation of furnace draw by rationalising product lines and dedicating furnaces to specific colours. We initiated discussions with certain key customers about plans to further rationalise our product mix. We engaged specialised glass consultants to facilitate a further improvement in operational efficiencies.

Aligned to our strategic imperative to manage costs stringently, we successfully installed and commissioned a dedicated gas transmission line to our factory gate and began reaping the related cost savings. We improved management of costs by securing, by way of contract, the supply of all our raw materials.

To enhance our inspection capability, specifically relevant to wine bottles, we installed and commissioned new bottle inspection equipment in July on Furnace 1. This is in line with our strategic imperative to invest to compete. Since 2015, Nampak Glass has doubled its share of the market in wine. In 2017, our market share expanded to 21% from 15%, and we see further room to grow.

We kept up our participation in the voluntary industry initiative, The Glass Recycling Company (TGRC), which is well positioned to submit industry waste management plans in response to proposed new legislative requirements. In 2016, 41% of all glass consumed in South Africa was collected for recycling. We also worked on a number of water-saving initiatives, targeting the goal of becoming a zero-effluent discharge plant by recycling process water. In the year we retained certification of our glass operations for environmental and energy management standards, as well as those for food safety.

Looking ahead

We expect the trading environment to remain challenging. Our focus in 2018 will be largely internal – in an effort to improve our operational efficiencies and manufacturing disciplines. We will introduce new technical skills and greater management oversight to ensure improved and optimal operation of our furnaces. We expect to grow our volumes of emerald green glass, while rationalising our flint bottle product mix. Furnace 1 is scheduled for a rebuild in 2019 and preparations are well advanced for this project.

A number of product development opportunities in the beer sector bode well for Nampak Glass as does the opportunity for volume growth in this sector. We will continue to leverage further growth in sales to the Cape wine sector.

REST OF AFRICA

While we still see opportunity to invest in glass-making facilities in the Rest of Africa in the medium to longer term, the unfavourable macro-economic environment across much of the continent means that any decisions will only be taken once conditions improve significantly.