PACKAGING firm Nampak Zimbabwe Limited’s group revenue in US dollar terms fell 10% in the nine-month period to June, owing to the El Niño-induced drought.
During the period under review, under reveal the economy was ravaged by the El Niño-induced drought that saw average to below normal rainfall.
Most crops are expected to record significantly reduced output for the 2023/24 agricultural period with tobacco production expected to decline by about 20% to 235 million kilogrammes from the prior season.
This will result in depressed forex earnings and lower demand for packaging, consequently affecting Nampak’s revenue as the tobacco industry remains big business for the packaging entity.
“Group revenue for the nine months to 30 June was 10% down in US dollar terms compared to prior year. This is mainly due to FY23 benefiting from a record tobacco crop in Zimbabwe, compared to a drought year in FY24,” Nampak group managing director John van Gend said in the firm’s trading update for the third quarter and nine months ended June 30 2024.
“Group volumes for the third quarter were 2% ahead of prior year with most of the product lines higher than last year except for HPDE and commercial cartons which were affected by a slowdown in demand and increased competitor activity.”
He added: “Cumulative volumes for the nine-month period to June 2024 are now 3% below prior year due to volume recoveries in the current quarter which have made up for the volume losses in the previous quarter, particularly in the paper cluster as well as in metals.”
According to Nampak, the economic environment continues to show signs of strain.
- Nampak sits on ‘significant capital projects’
- Nampak focuses on cost control measures
- Nampak Zim sees slowdown in sales volumes
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“Power shortages, particularly at the Ruwa plant, affected the operation, resulting in the increased usage of generators to meet customer demand,” Van Gend said.
“The third quarter under review was largely affected by tight liquidity following the introduction of the new Zimbabwe Gold currency from April 5, 2024.”
The liquidity crisis was caused by tight monetary and fiscal regulations causing reduced spending.
“Despite the tight liquidity, which affected volume offtake in some product lines such as HDPE and commercial cartons, overall volumes for the third quarter were 2% up compared to the prior year period,” Van Gend said.
“Sales volumes at Hunyani Corrugated division for the third quarter were 2% down on prior year. Sales volumes to the tobacco sector were 4% ahead of the same period last year due to early season deliveries. The commercial carton volumes were 19% down on prior year and have been affected by competition with lower price offerings.”
However, he said there had been an improvement in the horticulture volumes and there would be continued focus on developing this market.
“The cartons, labels and sacks division sales volumes for the third quarter were 3% down on prior year due to reduced demand for tobacco paper wrap. Other commercial packaging was 7% up on prior year due to improved demand,” Van Gend continued.
At Mega Pak, however, third quarter sales volumes were 11% up on prior year buoyed by increased demand in the preforms category despite reduced volumes in HDPE and closures.
At CarnaudMetalbox, sales volumes in the third quarter were 4% down on prior year, the company said.
“Metals volumes were 21% ahead of prior year due to raw material availability. Plastics volumes were 10% down on prior year on the back of liquidity challenges for some major customers,” Van Gend said.
He said the firm would focus on cost cutting measures to preserve margins and improve profitability, considering the macroeconomic challenges.
