Nampak Profit Declines as South African Margins Shrink

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Nampak Ltd., Africa’s biggest manufacturer of beverage cans, said first-half profit fell 13 percent as declining margins at its South African unit offset gains elsewhere in the continent. The shares dropped.

Net income for the six months through March declined to 644.7 million rand ($54 million) from 740.1 million rand a year earlier, the Johannesburg-based company said Tuesday in a statement. The average margin on trading profit in South Africa fell to 6.9 percent, from 10.7 percent a year earlier, while the company’s overall margin was 9.8 percent.

Nampak is working to reduce operating costs while expanding in other African countries as weak economic growth in its home market squeezes profits. South Africa’s economy grew at a slower pace in the first quarter, the statistics office said in a report on Tuesday, as power cuts curbed factory output and a drought cut harvests, undermining job creation.

“The manufacturing game in South Africa is in a tough space at the moment and we certainly are no exception,” Nampak Chief Executive Officer Andre De Ruyter said by phone. The company is also addressing operational issues at its glass division, which contributed to the decline in profit, and has started seeing improvements, De Ruyter said.

Stock Slump

Nampak shares dropped 13 percent to 36.59 rand as of 3:28 p.m. in Johannesburg, the biggest intraday slump since May 2013. The stock has declined 16 percent this year, compared with a 7.2 percent gain in the 170-member FTSE/JSE Africa All-Share Index.

Nampak has sold businesses including its corrugated and tissue divisions as part of a plan to exit less-profitable operations and reinvest the proceeds in other African countries. While the company may still sell “a few bits and bobs,” it’s not likely to be anything substantial, De Ruyter said.

Nampak said on Tuesday it’s evaluating the potential to establish new glass operations in Angola, Nigeria and Ethiopia. The company decided against acquisitions it was considering in Nigeria and Kenya after other parties made offers that were worth more than Nampak was prepared pay, De Ruyter said.

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