PACKAGING materials supplier Nampak Zimbabwe says it has benefited from improved United States dollar collections during the third quarter ended June 2023 on the back of constrained local currency liquidity.
According to the group's trading update for the third quarter and nine months ended June 2023, most of the foreign currency generated was deployed to working capital to meet customer demand.
“The liquidity crunch in the market continued to affect trading, resulting in more domestic transactions occurring in foreign currency. The order book across the group’s operating units remains firm,” group managing director (MD) John Van Gend said in a trading update.
Gend said revenue for the nine months to June at $413,2 billion grew by 41% in inflation-adjusted terms compared to the prior year period. Revenue in historical terms for the same period rose by 671% to $117,2 billion.
“Marginal volume improvements and inflationary pricing were the major contributors to the revenue growth. The group has benefited from improved USD collections in the quarter on the back of constrained ZW$ liquidity, most of which was deployed into working capital to meet customer demand. The group remains profitable despite the inflationary pressures pushing up the cost base,” the MD said.
Authorities maintained a tight monetary policy in the first half of the year, instituting a number of liquidity management tools. These included liberalisation of the exchange rate, tighter monetary policy, and the introduction of gold coins and gold-backed digital tokens.
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This has resulted in an acute shortage of the Zimbabwe dollar on the market.
The quarter under review was characterised by ongoing currency volatility resulting in inflationary pressures being felt across all the market segments.
Although the third quarter volumes were marginally up compared to the prior year period, the gain was weighed down by lower volumes at Megapak which continued to be affected by the increasing frequency of power cuts at the Ruwa plant.
Net working capital increased in the main due to an increase in debtors. The group’s cash balance was $24,6 billion at the end of the third quarter, mostly due to export receipts that came at the close of the period. Most of this balance will go towards stock replenishment and the settlement of trade payables.
Sales volumes at Hunyani corrugated division for the third quarter were 5% up on the prior year period. Sales volumes into the tobacco market were 12% ahead of the same period last year due to an improved tobacco crop in the year.
Commercial carton volumes were 12% down on the prior year period due to constrained raw material supplies. The cartons, labels and sacks division sales volumes for the third quarter were 7% up on prior year due to improved demand for tobacco paper wrap.
Other commercial packaging was in line with the prior year volumes for the third quarter.
The third quarter sales volumes were down by 7% compared to the prior year period. Despite firm demand from their customers, rolling power cuts negatively impacted the operation’s ability to meet customer demand.
“Additional generator capacity has been installed to mitigate the impact of the power cuts,” Gend noted.
The sales volumes in the third quarter were 9% above the same period last year. Plastics led the recovery buoyed by higher HDPE bottle volumes, which were 36% above the prior year period. However, metal volumes were 17% down on prior year, while closures were 4% down on the same period last year.
Horticultural development at the group’s Maganga Estate near Macheke is progressing well and optimum use of the estate will become a reality in the not so distant future.
Capital expenditure of $2,8 billion during the nine-month period under review relates mainly to the Netstal injection moulders, chiller and generator for Megapak.
Various projects are under active consideration and may be pursued subject to the availability of foreign exchange, the MD indicated.
In the outlook, the Nampak boss said the operating environment remained uncertain given that the election season is on the horizon.
He said the surge in inflation was a key issue that would impact on performance going forward.
“Our ability to continue sourcing key raw materials on the back of global supply chain constraints will be a key driver in sustaining the current operational performance. The group will continue to focus on cost containment measures in order to improve profitability across all the businesses,” he added.