Nampak now an intriguing package

Nampak is about to turn the page again. Two years after veteran fixer Phil Roux was drafted to perform what can only be called “emergency surgery on a patient in ICU”, the CEO has signalled that most of the life-saving work has been done and that he will hand the scalpel to successor Andrew Hood on September 30 2025.

Roux’s short but bruising tenure began after an ill-fated, debt-fuelled expansion into Africa had left South Africa’s largest packaging group on the verge of failure. A hastily arranged R1bn rights issue in late 2023, followed by the headline disposal of Bevcan Nigeria for R1.3bn and an aggressive programme to squeeze operating plants for every ounce of efficiency, stabilised the balance sheet and pulled the company off its deathbed. Trading margins have swung from 4.6% in the first half of 2023 to 19.3% in the latest interim period, while net debt has fallen by about a third to R3.1bn. Shareholders have been rewarded with a share price that has more than doubled in 12 months, yet the stock still changes hands at barely six times forward “clean” headline earnings, a valuation that looks undemanding for a business whose worst wounds have been stitched up.

Roux will not disappear entirely. Once he vacates the corner office he will remain on the board and chair a newly minted strategic planning and oversight committee, a subcommittee tasked with keeping customer engagement, plant investment and capital allocation tightly aligned with the group’s refreshed priorities. Hood, who has been wearing the COO hat since April and becomes CEO on October 1, will sit alongside him as a permanent member to ensure the execution engine and the strategy engine stay meshed.

If Roux’s hallmark was triage, Hood’s will be optimisation. The University of KwaZulu-Natal alumnus has three decades of MD and executive experience across multiple geographies and was parachuted into Nampak’s Diversified South Africa portfolio two years ago with a mandate to fix chronic underperformance. His success there — operating profit in the unit rose 49% this half — convinced the board that continuity trumped external glamour.

There are three continuing segments. Beverage South Africa, responsible for 57% of group operating profit, is still the crown jewel. Demand for aluminium cans in the local market is running ahead of domestic capacity, fuelled by the meteoric rise of 500ml “value” packs, energy drinks and ready-to-drink (RTD) cocktails. Springs Line 2 has been temperamental, but the engineering team, bolstered by skilled technicians from Angola and the Philippines, is pushing it steadily towards an optimal run rate. To increase capacity, Nampak will relocate a mothballed line from Angola, a project that carries a relocation cost but little incremental capex.

If Roux’s hallmark was triage, Hood’s will be optimisation

Angola, delivering 16% of profits, remains the outlier that routinely embarrasses its South African cousin on efficiency and yields despite operating at only 40% of installed capacity. The caveat is growth: pedestrian GDP and stubborn inflation could keep local volumes flat until additional filling capacity, now under construction by key customers, comes on stream.

Diversified South Africa contributes the remaining 27%. Here Hood has already tightened the screws: food-can share has risen, new blue-chip clients have been won and an improved fish can supply is lifting volumes. The divisional margin leap underscores the power of cost discipline in a plant once hobbled by inefficiencies. Risks linger. Consumer wallets are thin, and long-term security of fruit-canning volumes at Ashton and Langeberg — recently sold by Tiger Brands to a farmer-employee consortium — remains uncertain, even though it contributes only 5% of the division’s revenue.

The exit door is still revolving. Zimbabwe is in the process of being sold for $25m. Competition authorities have fast-tracked their work, the buyer has secured half the purchase price, and Nampak hopes to close soon. Proceeds will be used to drive net debt down to the 1.6 times earnings before interest, tax, depreciation and amortisation target, a level the board is comfortable with. Importantly, the $52m in historic Zimbabwean cash trapped by the government is fully provided for, so any recovery is pure upside.

Strategically, the drink-can format still has wind in its sails. Large-pack energy drinks and low-alcohol RTDs continue to migrate from PET and Tetra Pak into aluminium, wine-in-a-can is no longer a curiosity and regulatory shifts towards non-BPA coatings favour suppliers that have already done the conversion homework. Lightweighting programmes are shaving off grams per can, and Nampak is nudging its suppliers to lift recycled content.

None of this makes the share a one-way bet. A consumer recession at home, an unexpected kwanza devaluation or a mistimed production ramp-up could rattle earnings. Yet, after two years of firefighting, the company finally looks boring in the best sense of the word: predictable cash flows, defendable market shares and a balance sheet that no longer keeps the treasury team awake at night. For investors willing to look beyond the scars of the past, six times forward earnings feels like a knock-down entry price for a business that has already proved it can turn a crisis into an opportunity.