Operational review


Clinton Farndell
Quinton Swart

Nampak has 16 plastics and liquid cartons facilities in South Africa, running lines for customers across various industries. We make PET bottles; HDPE bottles; closures; paper gable-top cartons; drums, crates and tubes. In the Rest of Africa, we have bottle, preform, crate and closure businesses and are the leading producer of rigid plastic packaging in Zimbabwe and Zambia. In Europe, we operate eight facilities producing HDPE bottles.



(R million)

  R2 968 million

(2018: R3 398 million)



  1 632

(2018: 1 794)


Energy use

 380 801GJ

(2018: 372 813GJ)

Trading profit

(R million)

  R209 million

(2018: R197 million)




(2018: 0.58)


Emissions intensity

(t/CO2e/Rm revenue)


(2018: 20.10)

Trading margin



(2018: 5.8%)




Under a new management team, Nampak Plastics focused on better managing costs. We reported operational improvements, reduced waste and greater efficiencies, as well as enhanced working capital management. We honed our sustainability approach, ensuring that our products are designed for recycling and contain an increasing percentage of post-consumer recycled material. This is to support greater diversion of plastics from the natural environment and landfill.

In tough economic conditions, the sales volumes of our liquid bottles and closures business declined, exacerbated by a fire at a large dairy customer which disrupted production. However, the benefits of our turnaround plans, as well as new customers, supported profitability.

The liquid cartons business reported a strong operational performance and increased demand for our Forest Stewardship Council-accredited products to package milk, fruit juice and sorghum beer. This follows significant efforts to be more innovative in the way our packaging looks as well as in how we service our customers. We entered new markets, including launching a 500ml paper carton for water.

With an improved outlook for crates and drums, we reversed an earlier decision to dispose of this business, except for the part that manufactures intermediate bulk containers. We secured new crate allocations and will be investing in new crate-making equipment. In the year, we established greater potential to expand the drums business into new markets, including agriculture.

We invested in the moulds required to produce closures for motor lubricants bottles. We increased sales of roll-on pilfer-proof (ROPP) closures and decided to move the metal closures business in 2020 to DivFood, which uses the same raw materials. With investments in machinery for new water bottle closures, and planned investment in returnable PET bottles and PET jars, our investments are in line with our focus on PET. The market is increasingly looking to adopt returnable PET to reduce single-use plastic.


After recording the early benefits of the turnaround plan in liquid packaging at our Isando factory and crates at our Olifantsfontein facility, we expect greater benefits in 2020. Further innovation of our beverage cartons and increasing consumer demand for environmentally friendlier packaging will set this business on a path for sustained growth in further profitability enhancements.

We see opportunity for increased use of PET packaging and in particular for returnable PET bottles (rPET) in support of consumers' desire to rely less on single-use PET. At Nampak, we use up to 50% rPET in our processes. Water bottles are still made from virgin material. We continue to pursue further reductions in the weight of our products, as we reduce the 2 litre HDPE milk bottle to 38g.

In closures, we forecast growth in water and sports-drink closures as well as in motor oils. In drums, we expect greater demand from the agricultural sector. As the market for returnable bottles grows, we see opportunity for growth in crates.

In South Africa, in 2020 our liquid cartons business is introducing a new unbleached board for beverage cartons, with improved appearance and functionality, supported by recyclability, renewability and FSC accreditations.

We continue to explore options for our small tubes business, which could include its disposal.



In Zimbabwe, our Plastics business reported a steep decline in revenue due to the impact of hyperinflation accounting standards which require the use of the closing rand/ Zimbabwe currency rate rather than the average rate for the year. Demand slowed in a weak economy and the unavailability of foreign exchange to sustain stable raw material purchases. In Zambia, demand for our crates improved significantly, while that for our bottles and closures declined in line with weaker economic growth, in turn a result of adverse weather conditions that affected crops and hydroelectric power generation.

In Ethiopia, profitability improved in the first half but demand for crates declined towards year-end, constrained by the limited supply in the market of foreign exchange with which to fund the necessary imports of raw materials.


The outlook for our Plastics business in Zambia is strong, supported by a new long-term contract to supply crates to a large customer. In Zimbabwe and Ethiopia, the shortage of foreign exchange with which customers can buy raw materials means a softer outlook for packaging in 2020.



Nampak Plastics Europe reported a significant loss after a large customer took production of milk bottles in-house and the commissioning of our new production facility in Scotland was delayed, putting pressure on our other sites. The group launched a process to dispose of the business, classifying it as a discontinued operation.

Backward integration by a major milk producer has been a feature of the struggling UK dairy industry in recent years, but the loss of the business of this substantial player in the year was six months ahead of schedule, impacting our volumes significantly. The other main milk producers have stated that backward integration is not the route that they favour, preferring to rely on specialist suppliers such as Nampak.

Financial performance was also affected by sharp increases in the price of the recycled material that we include in our production processes. This now costs more than virgin raw material as the exponential increase in pressure on plastics has led to a spike in demand for recycled material from a number of industries. Previously, it was only the dairy industry in the UK that used significant proportions of recycled material in the manufacture of plastic bottles.

In the year we were not able to pass on to our customers this increased cost of raw material.

Between 10% and 50% of the content of Nampak Plastics Europe's milk bottles is recycled, and we have a target to reach 50% in the next three to five years should supply be sufficient.


Nampak Plastics Europe is in a divestiture process which is expected to be completed during 2020. Operational management is focused on securing greater volumes from the new site in Livingston, Scotland, as well as returning other operations to the levels of efficiency reported in 2018. We are optimistic that work to secure customers outside the dairy industry – including in the home care, laundry care and personal care markets – will bear fruit and be attractive to potential acquirers. We are also focused on winning new dairy customers. Should recycled raw material prices remain elevated, we will pass on those increases to customers.