Panashe Nyamudeza and Jennifer Mufamba

Nampak Zimbabwe's revenue grew by 83 percent in the quarter to December 31, 2021 driven by improved sales volumes and inflationary pricing.

The strong growth in revenue positively impacted the group's profitability for the year, which surged 27 percent in historical terms compared to prior year.

In a trading update Nampak said there was strong demand for its products across all segments of the business despite challenges in the operating environment.

"The three-month period from October 1 2021 to December 1 2021 was marked by a sustained strong demand across all sectors of the business, although tempered by challenges in the operating environment," said the group managing director, John van Gend.

Nampak's networking capital position is positive as the group holds $599 million, which will be used for capital projects, stockholding and settlement of trade payables.

However, the group's gross margins retreated by 5 percent due to escalated costs.

"Margins were somewhat squeezed due to increased competition, while reduced power supplies resulted in greater generator use and the widening divergence between the auction rate and the market rate contributed to higher inflation," said the group.

Nampak said the printing and converting segment, Hunyani Corrugated Division, recorded a 43 percent sales volume growth driven by a carry-over of late-season tobacco box orders from the previous financial year.

The commercial sector volumes dropped by 3 percent compared to the same period last year propelled by paper supply challenges despite a strong order book. This is anticipated to carry on for the rest of the year due to world paper shortages.

Mr van Gend said volumes in the cartons labels and sacks division dropped by 23 percent compared to the previous year on the back of lower flour bag sales and tobacco paper sales.

Mega Pak saw demand in the large injection market exceed the company's available capacity while volumes decreased by 2 percent from the comparative period.

The group said all sectors of the business were affected by raw material shortages. Unreliable electricity supply at Ruwa affected both available plant capacity and operational efficiencies.

The increased demand in the market remained strong and there was an upturn in tank demand as regional economies are still recovering.

Nampak also said, indirect exports of preforms into Zambia were strong while direct exports were lower than planned.

CarnaudMetalbox business depended largely on local agents for the supply of plastic raw material, which boosted its volumes 2 percent compared to the prior year quarter period.

Furthermore, the company's high-density polyethylene bottle volumes jumped 10 percent up on the previous year period aided by four percent growth in injected closure volumes.

Meanwhile, the metals volumes were down 13 percent as a result of tin plate shortages.

The capital expenditure for the period under review was $70,7 million, which relates to projects started in the prior year and spares capitalised.

"A new injection molding Machine is on order for Mega Pak and the replacement of generators for Hunyani and Mega Pak is also in progress," said the group.

Nampak said it would continue engaging with the relevant authorities to regain effective control over its estates.

"At Maganga Estates, we are entering into joint venture agreements with third parties to rehabilitate it for timber and agricultural purposes in line with the National Development Plan," the company said.

Meanwhile, the company is still waiting for a long-term lease agreement from the government.

In the outlook, the company said the gap between the official and market exchange rates remains difficult and is now leading to an inflationary spiral, which in turn increases cost and wage pressures.

Nampak went on to say that the scarcity of raw materials and ongoing difficulties in accessing sufficient foreign exchange are ongoing challenges that are not going away any time soon.

However, businesses are resilient, but persistent economic headwinds hamper operations

Copyright The Herald. Distributed by AllAfrica Global Media (allAfrica.com)., source News Service English