Material issues

Material issues are those with the potential to significantly affect our ability to deliver on our strategy, create value and sustain the group in the short, medium and long term. The most noticeable impact of these issues in the short term is on the group's share price, which lost 12,8% of its value in 2018, despite a significant cash transfer from Nigeria and Angola, a successful refinancing of the group in which a R12.5 billion funding package was raised and a consistent improvement in HEPS. We responded to increased competition in the beverage can market by closing Bevcan South Africa's Epping tinplate line and restructuring its cost base accordingly.



Greater operating efficiencies supported stronger profits for Bevcan South Africa. DivFoods increased profitability, helped by better safety and supply chain management. In South Africa, Plastics had a challenging year, but the liquid cartons and Zimbabwe Plastics operations performed well. Lower demand in Nigeria and Angola adversely impacted profitability in the Rest of Africa. The UK Plastics business improved its operational and financial performance. Paper recorded greater production efficiencies and profitability. A formal decision was made to dispose of Glass with this division being classified as an asset held for sale and a discontinued operation. Despite increased demand, Glass continued to experience production and skills challenges, exacerbated by electricity supply problems, resulting in a small profit for the year. The disposal process is progressing to plan.

Trading profit (R million)

Trading profit (R million)

  • Earnings per share and headline earnings per share
  • Continuing operations
   – EPS     169.2     38.4     122.3
   – HEPS     168.7     15.3     146.3
  • Continuing and discontinued operations
   – EPS     76.0     107.7     36.6
   – HEPS     151.4     22.3     123.8
  • Intensified our efforts to improve operational efficiencies
  • Refinanced the group's maturing debt profile and further strengthened the balance sheet
  • Decided to dispose of Glass operations
  • Closed our Cape Town tinplate beverage can line
  • Implemented first of Plastics plant and depot closures in South Africa
  • Announced plans to sell crates and drums businesses


Angola faced severe liquidity restrictions in the year, but these improved significantly in August with a transfer from Angola of R1.6 billion achieved. Nigeria recovered from the US dollar liquidity challenges of 2017, allowing for unfettered cash transfers. Zimbabwe suffered mounting foreign currency shortages. The kwanza depreciated 75% to the US dollar; the naira was stable. Dollar liquidity improved in both Nigeria and Angola, supported by the higher oil price. The functional currency for Bevcan in Angola and Nigeria is the US dollar, and that for our paper and metals businesses in Nigeria is the naira. When translating from functional currency to reporting currency, all movements in monetary items are made through the profit and loss account.

Angola forex sales (billion)

Angola forex sales (billion)

  • Cash balances in Angola, Nigeria and Zimbabwe increased by 3% to R3.8 billion from R3.7 billion
  • Cash balances in Zimbabwe rose to R1.2 billion from R654 million
  • Nampak transferred R1.8 billion (US$138 million) from Angola and R1.6 billion (US$120 million) from Nigeria in 2018; minimal cash was transferred from Zimbabwe
  • Experienced abnormal forex losses of R127 million predominantly due to devaluation in the kwanza resulting in a forex loss of R116 million compared to forex losses of R160 million in 2017 that arose from the devaluation of the naira
  • Limited our ability to settle intergroup loans and internal creditors
  • Supply chain disruptions in Ethiopia and some Zimbabwe operations
  • Improved cash transfer from Rest of Africa to R3.5 billion, including R1.8 billion from Angola
  • Limited further funding in Angola and Zimbabwe and partnered with customers to provide dollar funding for imported raw materials
  • By hedging through US linked kwanza bonds, we shielded Nampak's Angolan cash from a potential loss of R1.6 billion due to the devaluation of the kwanza
  • Continued to link Bevcan Nigeria product pricing to dollar
  • Secured long-term committed funding package of R12.5 billion
  • Announced further investments of R380 million in Angola and Nigeria for expansion
  • Focused on strengthening balance sheet, improved net gearing to 37% from 45% and a current ratio of 2.2x from 1.3x


Despite encouraging political developments in many markets, the main economies in which we operate were subdued. In South Africa, the economy contracted and pressure on disposable incomes increased due to an increase in VAT to 15%, fuel price hikes and higher levels of unemployment. South Africa entered a technical recession in the second half which impacted consumer demand. Nigerian growth was tentative, slowing in the second quarter. Angola's GDP growth was lower than expected because of lower oil prices and production. Customer demand in Zimbabwe remained resilient despite continued economic malaise and ongoing forex shortages. Consolidation in our customer landscape continued. Competitive activity increased in South Africa, but declined in Zimbabwe. South Africa Metals performed well despite increased competition.

South Africa, Nigeria and Angola GDP growth (%)

South Africa, Nigeria and Angola GDP growth (%)

  • Reduced demand for packaging products, especially discretionary spending items
  • Stable demand for cans in which lower-priced sources of protein are packaged as consumers trade down
  • Reduced affordability of products made with dollar-denominated raw materials
  • Pressure on company's revenue and earnings
  • Limits to the potential for organic growth and new investments
  • Where competitors have gone out of business, Nampak is uniquely positioned to take advantage of any improvement in economic conditions
  • Continued focus on operational excellence to improve overall performance
  • Maintained efforts to address fixed costs, consolidating sites and closing lines
  • Further reduced gearing to 37% from 45% in the prior year
  • Restructured maturing debt profile to further strengthen group's financial position
  • Rationalised some Rest of Africa operations, mindful of the need not to lose our first-mover advantage
  • Decided to invest in our first food can line in Nigeria to take advantage of strong demand
  • Reduced the complexity of our Malawi operations
  • Adopted a new market approach in Zambia Paper business


Ensuring the safety of our people and that of our contractors is critical. Our overall safety performance improved, better than our tolerance level. Improving safety performance is indicative of significant improvement in operational discipline. We continued to face a shortage of skills, particularly in Glass. We maintained our B-BBEE contributor status at level 6, a good showing considering the more stringent measurement criteria with a clear requirement to improve on this rating. In a spill-over from events in the political arena, there were more reports of interracial tension in the workplace, and more calls to our tip-offs line. A number of diversity programmes are being implemented across the groups to assist in embedding a culture of diversity and inclusion.

Lost-time injury frequency rate over a five-year period

Lost-time injury frequency rate over a ve-year period

  • Safe operations enhance employee morale, business performance, the environment and our brand; unsafe operations harm people, the environment and our reputation
  • Insufficient skills may impact our ability to meet customer requirements and deliver on strategy, with the potential to affect profitability, investor returns and tax payable to authorities
  • Transformation to a more equal society enhances the sustainability of our business and the South African market; without it, this is at risk
  • A poor B-BBEE rating could impact the revenue of South African operations as well as employee relations
  • Continued to prioritise safety across the group with an improvement in the LTIFR ratio from 0.41 to 0.27
  • Centralised control and visibility of all B-BBEE activities through steering committee
  • Extended work on a new B-BBEE ownership scheme
  • Reduced our employee numbers by 5.8%
  • Responded quickly and decisively to reports of interracial tension, whether perceived or real
  • Devoted greater attention to employee relations and change management
  • Implemented tools for greater performance and succession management
  • Provided external managerial training aligned with Nampak skills imperatives


South Africa has a multitude of existing and planned legislative requirements, directly affecting Nampak or our customers. The increased regulatory load includes the Waste Management Act; the Industry Waste Management Plan; the planned tax on carbon emissions and the new tax on sugar-sweetened beverages. In other parts of Africa, significant levels of red tape and port and logistics inefficiencies hamper the importation of raw materials. Regulations relating to local content support the domestic manufacture of packaging products. Elections in South Africa and Nigeria in the year ahead could potentially impact the respective political landscapes.

Glass, metal, paper and plastic collected for recycling (%)

Glass, metal, paper and plastic collected for recycling (%)

  • Unpredictable policy changes make planning difficult
  • Waste management levies will place local manufacturing at a structural disadvantage
  • Additional fees could lead to the industry recycling less post-consumer packaging
  • Failure to remain compliant could lead to penalties and harm our licence to operate
  • Profitability will be pressured, impacting returns to investors
  • Opportunity to showcase and take advantage of our light-weighting capabilities
  • Greater demand for in-country production supports our Rest of Africa operations
  • Participated in industry-wide engagement with the government
  • Maintained our significant contributions to recycling
  • Sustained our efforts to further reduce the weight of products
  • Engaged with policy makers on proposed regulatory changes
  • Focused on unlocking further value from base businesses to build resilience to withstand requirements of greater regulatory burden
  • Ensured reorganisation of Paper operations maintained in-country presence