JOHANNESBURG – South African packaging manufacturer Nampak scrapped its half-year dividend on Wednesday and said it would reduce its property portfolio to cut debt, sending its shares tumbling 10%.
Nampak, which has operations in 12 African countries, said challenging economic conditions prompted it to forego an interim dividend and it aimed to raise R1.744 billion ($111 million) by selling non-core properties.
The firm’s debt has ballooned to more than R7.4 billion in the past five years as the dollar-denominated part of it grew as the rand weakened and as Nampak invested heavily in the rest of Africa, chief executive Andre de Ruyter said in a media conference call.
Besides weaker growth and volatile African currencies due to lower commodity prices, Nampak has experienced further delays transferring cash from bank accounts in Angola and Nigeria and converting it into US dollars.
Its cash balances in those two oil-exporting countries increased to R1.5 billion by end-March, from R700 million six months earlier, and Nampak said it expects currency volatility and liquidity constraints to persist in the medium term.
“The Nampak board has approved the sale and leaseback of 15 properties in the group’s property portfolio and an outright sale of one property,” the company said.
“We will use that to retire liabilities,” said De Ruyter.
Nampak’s shares were down 13.06% at R17.91, a three-month low at the close and are now down 26% this year.
The company’s R7.4 billion in debt grew from only R16 million in 2011, increasing its net gearing from 0 to 74% in five years. However, it reported a 4% rise in headline earnings per share (HEPS) for the six months through March to 105.2 cents, buoyed by a turnaround in its glass business and rising demand for beverages during a hot, dry summer in its home market.
“Increased beverage consumption as a result of a hotter than usual summer in South Africa benefited group volumes,” the company said.
Nampak’s glass manufacturing division, mostly beer and soft drinks bottles, returned to profit after heavy losses in the first half of last year, the company reported.
Headline EPS is the main profit measure in South Africa and strips out certain one-off items. ($1 = R15.6708)