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NAMPAK: Turnaround measures launched in Europe and South Africa as group fiscal year results fall

Nampak (Sandton / South Africa; www.nampak.co.za) is restructuring its plastics business after poor performance in Europe and challenges in Africa dragged down the packaging maker’s fiscal 2017 profits. Revenue at the Plastics division fell 17% to ZAR 4.624 bn (EUR 283m) and trading profit dropped 58% to ZAR 166m.

Nampak Plastics Europe's (Newport Pagnell / UK; www.eu.nampak.com) revenue decreased by 36% because of a strong rand versus the pound sterling and the sale of two in-plants to a major customer in the first-half of 2017. Demand from other key customers was relatively flat and uptake by new ones was disappointing, with CEO Andre De Ruyter attributing the cause to Brexit's fallout on the UK economy.

He told analysts Nampak booked impairments of ZAR 112m and cost provisions of ZAR 82m because it wanted to extricate itself from an “onerous” contract to build an in-plant for a new customer in Europe. The UK's dairy market conditions led to another ZAR 53m impairments at Plastics Europe. He said Plastics Europe, whose trading loss was ZAR 64m, would break even in 2018 and be profitable by the end of fiscal 2019.

A new management team, put in place in Europe this year, will continue cost cuts and widen its customer base by targeting those needing lightweight technology. In addition, order volumes were apparently cancelled by a major dairy customer of Nampak that will start producing its own bottles.

In South Africa, Gauteng and Isando plants are being consolidated, while the rigids plant in Industria is to be closed. The measures will generate around ZAR 17m annual savings after completion in the first-half of 2018. He added a “very detailed investigation” of all machinery was being made to improve utilisation rates in the plastics business.

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