NAMPAK – PACKAGING GIANT’S DRIVE FOR NEW MARKETS

Africa’s leading producer of cans and packaging Nampak is pushing forward an agenda for cultural change as it seeks new market opportunities.

 

The South African-based conglomerate Nampak is eyeing fresh challenges in sub-Saharan markets as well as driving forward a cultural change within the organisation.

Declining revenue in its home market has triggered a rethink on how best to combat the business hurdles going forward.

Last year sales remained buoyant thanks to growth in Nigeria and Angola but losses in the home-based glass division and increasing costs concentrated the minds of company chiefs.

However, the growth potential of a rapidly urbanising population means investment is still required to meet demand.

Nampak intends to expand through greenfield investment and acquisitions in metals, glass and plastics. In addition, it has been reducing the number of transport suppliers it is dependent upon.

Chief executive Mr. André Marinus de Ruyter said: “We are driving cultural change at Nampak to create a more supportive, collaborative and internally aligned operating company that performs as a single unit that can make better, buy better and sell better.”

He says the foundation stones have been laid for a more robust performance following restructuring charges of R244m.

“From an operational perspective, we have resolved the difficulties at our Glass operation. This division is now performing according to expectations. It had a significantly improved second half of the 2015 financial year, and the first few months of the 2016 financial year have been profitable. We are confident that Glass has turned around and will deliver profits to the bottom line.”

Spoilage concerns at its Bevcan aluminium beverage can lines in Springs continue to improve, and would not have a material impact on Nampak’s earnings in the 2016 financial year.

Last year revenue and profits outside South Africa increased substantially by 43% although foreign exchange control issues impacted on operating profits. The controls represent a hurdle on liquidity from Nigeria and Angola although the company managed to repatriate six million dollars a month.

There has also been a trimming of group operations with sales of the corrugated, tissue, flexible, recycling and sacks divisions. Further cost management and operational efficiencies were carried out.

During the year Nampak spent R2.2 bn on new equipment. There was also an increase in production at the group’s beverage can businesses, in particular Bevcan Nigeria and Bevcan Angola.

Can-Do

The pace of business change has led to new developments, particularly in the replacement of manufacturing tinplate cans to aluminium.

A high speed aluminium line was introduced at the Springs factory. This was designed to keep up with technological demands, customer focus and environmental impact. Cans in the international market are mostly made from aluminium so it was an inevitable move.

 

This also helps improve the recycling rate of beverage cans across South Africa. The aim is to achieve levels seen in Brazil where there is a collection rate of 98%.

A company spokesman said: “Aluminium is already the preferred medium for beverage cans internationally. Globally, 85% of all beverage cans are made from this material. New aluminium can lines are capable of running eight can sizes and produce cans at speeds of up to 3000 cans per minute, as opposed to the 1600 steel cans currently produced per minute.

“The decision to move to aluminium-bodied cans was a natural progression due to the inherent advantages the conversion will hold for the economy, the beverage industry, consumers and the environment.”

In addition, the material cost is transparent whereas steel is price volatile. Aluminium also weighs 60% less than steel resulting in reduced transportation costs.

The conversion to aluminium will also result in a significantly improved carbon footprint status. Approximately 10% less energy will be used in the manufacturing process due to no external coating required, only one bank of spray machines will be used, only one oven is used and conveying in the production line is reduced by two thirds, which will also save a lot of electricity.

Sister company Collect-A-Can is involved with recovery and recycling. Currently the recycling rate of all beverage cans recycled in South Africa is estimated at 72%, significantly more than any other beverage format in South Africa.

Collect-a-Can has been in operation since 1993 and was one of the first recycling companies in Southern Africa. Today, there are over 220 000 otherwise unemployed, informal collectors who earn a living by collecting cans.

A new interactive website designed to help township businesess with their customers has been launched by Nampak Bevcan. The website, cando.sa.com,  according to the company,  is mobile compatible and allows township outlets to upload their business’ profile free of charge, advertise online and communicate with their customers.

Through the site, township business owners who do not have websites now have an opportunity to create an online presence to generate awareness and interest in their businesses. The website also offers outlets that are already active on social media and have their own websites exposure to a larger market.

COLLECT-A-CAN CHANGES

Southern Africa’s can recovery and recycling organisation, Collect-a-Can, is streamlining and restructuring operations.

“Collect-a-Can is still committed to the can recovery in the whole of Southern Africa and will continue to operate in- and service the Cape region,” says Zimasa Velaphi, public relations and marketing manager.

Collect-a-Can assures its local partners and clients that its efforts to protect the environment and educate and uplift the Cape communities will not be negatively affected by this decision

 

“We have always worked closely with our Collect-a-Can representatives and partners to help deliver on local can recovery needs and maintain our Cape regional footprint. For 23 years, Collect-a-Can has been at the forefront of minimising the negative impact of used metal cans on the environment and we will continue to do so going forward”, said Velaphi.

BLACK EMPOWERMENT

With the introduction in 2016 of the Department of Trade and Industry’s new Codes of Good Practice, Nampak – like many other companies in South Africa – faces a significant downward adjustment to its B-BBEE (Broad Based Black Economic Empowerment)

In 2015, black ownership of Nampak was 32.92% and black female ownership was 11.40%. The B-BBEE ownership structure that was established in 2005 matured on 30 September 2015. Most of the participants in this structure will retain their shareholding, while some are electing to trade their shares.

The group is considering its approach to ownership during 2016 once the current fluid situation around ownership settles.

Nampak’s target is for 60% black representation at management level in its South African operations. In 2015, the actual black management representation achieved in our continuing operations was 59%.

A spokesman said: “For 2015, our target was for 32% female representation, which we achieved. We continue to grow our female representation through the disciplined injection of talent with particular focus on graduates and apprentices. As a manufacturing organisation, we have typically been unable to attract and retain women representation. This has a negative impact on our rating in this category.

“Transformation is imperative for the company to deliver an environment which is conducive to equality, fairness and transparency. We undertake to continually address within our employee base any inequalities present with regard to race, gender and disability and to accelerate progress through structured skills development programmes and the injection of talent.”