It’s been a tough two years of restructuring but 98% of the heavy lifting has been done and Nampak can now focus on operational efficiencies, growth and improving the margin.
That’s according to CEO Phil Roux, speaking at the company’s AGM on February 10.
The turnaround at the packaging giant has been profound. It was only a few short years ago that the debt-laden company was brought to its knees, suffering from its misadventures in Africa, market complacency and earnings misses.
Activist A² Investment Partners and other institutional shareholders stepped in in late 2022 to engineer a recovery. This led to material change in the Nampak board and managerial structure. Roux, a turnaround specialist and former Tiger Brands and Pioneer Foods executive, was appointed CEO in April 2023 to chart a new path for the company.
Part of this process was a well-supported R1bn rights issue at R175 a share in September 2023 to shore up the balance sheet as the restructuring plan was thrashed out. Furthermore, assets deemed to be noncore, low margin or problematic were disposed of, with the proceeds used to degear the company’s balance sheet.
Asset sales have included Nigerian and Tanzanian property (R140m), equipment (R40m), the liquid cartons business (R450m) and labelling and barcode business I&CS (R142.5m). The largest deal was the sale of Bevcan Nigeria for R1.26bn, confirmed in January. All proceeds were used to repay group debt. Operationally, there has been a general improvement in the business, though there has been the odd misstep.
A year-end 2024 trading update miscommunication, later clarified, and concerns that the Bevcan Nigeria deal had stalled resulted in Nampak’s share price sliding in late 2024. The stock had fallen 19% to R386 by mid-January 2025. Since then, with confirmation of the Nigeria sale, the stock has rallied to R453 at the time of writing. On a 12-month perspective, the share price is ahead 146% as investors cheered the company’s rise from the ashes.
The financial 2024 results to September detailed a step-change in margins as rightsizing, cost extraction and asset disposals resulted in an operating profit of R1.5bn, as against the prior year’s loss of R1bn. Strong growth in beverages (+38%), a surge in contributions from the diversified unit in South Africa and the beverages unit in Angola and a sharp reduction in corporate costs drove the recovery.
Cash generation improved 114% to R1.6bn, with operating margin in all divisions recording material improvement. Net finance costs fell 24% to R926m and will fall further in the year ahead. Headline earnings of R33.61 were reported from a significant loss in the prior year. Net debt at year-end was R4.4bn with debt expected to drop to R2.6bn after the disposals. Guidance suggests that on its current trajectory, Nampak should be debt free in three years.
Roux said at the AGM that demand had been strong, especially in the beverage category, but Nampak had not been able to fully meet it. The company has expanded its processes in its plant in Springs on the East Rand to meet the growth in demand for 500ml cans. It also plans to move an underutilised line from Angola back to Joburg to uplift capacity and aid growth to 2028.
With the share price ahead strongly, the market and investors will need further evidence of operational improvement and profit enhancement to continue the uplift. With March interim results ahead, the market will scrutinise the balance sheet. IM expects more asset sales, with the Zimbabwean business a clear favourite for sale and exit given the currency volatility there. Nampak has about $35m trapped in Zimbabwe that, if extracted, would please investors.
Nampak is now back on a solid footing. Roux was upbeat at the AGM. Early investors in Nampak have been well rewarded though IM believes there is further uplift to come as costs fall and it regains some lost market share, especially in canning.
At current prices and an earnings multiple of 13.5, the stock looks full. However, if Roux indeed gets Nampak to fire on improved earnings cylinders, this rating will unwind quickly. Looking into financial 2026, Nampak looks attractive.
* The writer owns shares in Nampak
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