Diversified packaging manufacturer Nampak (Sandton / RSA; www.nampak.co.za) is to “fix, sell or close” one in five of its global operations. Speaking at the announcement of the group’s annual results, new chief executive Andrew Marshall said that 20% of operations were not performing satisfactorily and were either losing money or achieving returns that were “less than hurdle rates”. This situation has existed for a number of years, he added.

The proposed actions are part of a wide-ranging strategic review by Marshall as he revealed that pretax profits in the year to 30 September had fallen 61% to ZAR 272.3m (EUR 24.5m), despite a 6.1% revenue increase to ZAR 19.6 bn (EUR 1.8 bn). The CEO said the reasons for the profits slump included a general decline in volumes and the loss of business arising from the collapse of key UK milk bottle customer Dairy Farmers of Britain.

Trading income from the plastics business over the 12-month period fell 21% to ZAR 256m (EUR 23m), of which 36% was generated in Europe and 64% in Africa. Revenues declined 3.6% to ZAR 4.76 bn (EUR 428m). Plastics sales in Europe slipped 15% to ZAR 1.5 bn (EUR 135m), providing a margin of 6.2%, down from 9.3% in 2008. When expressed in sterling, says Nampak, European revenue was down 11% and trading income tumbled 42% to GBP 6.7m. In addition to the collapse of Dairy Farmers of Britain, the business was hit by the closure of three other dairies.

In recent years Nampak has been making high levels of capital expenditure, totaling ZAR 5.6 bn (EUR 500m) in the five years since 2005. Investment will now be restricted as part of a cost reduction programme. Debt levels have also been increasing steadily over the last five years and a new management, with Tom Reid as head of business in Europe, is charged with reducing debt and interest charges as part of a greater focus on operational activities. Head office costs will be slashed by ZAR 35m (EUR 3.2m).