Operational review - Paper

Nampak’s Paper businesses are in Nigeria, Zimbabwe, Kenya, Zambia and Malawi. We supply a range of sectors, from milling, cigarettes and tobacco to the sorghum beer industry. In most of these markets we are the major player. Among our extensive product range are cartons, sacks, bags, board and boxes.

Key developments
  • Increased revenue and trading profit across most regions despite tough macro-economic environment
  • Benefited from import substitution in many markets amid a shortage of hard currencies
2016 2015 % change  
Key natural capital inputs:
Energy use (GJ) 152 760 144 568 6  
Outputs affecting natural capital:
Emissions intensity (t/CO2e/Rm revenue) 5.75 8.88 (35)
Financial capital:
Revenue (R million) 1 749 1 470 19  
Trading profit (R million) 236 211 12  
Trading margin (%) 13.5 14.4 –  
Human capital:
Employees 702 741 (5)
LTIFR 0.20 0.49 Improved  
Rest of Africa

Nampak’s paper operations, all of which are in African countries beyond the borders of South Africa, had a mixed year. Revenue improved by 19% and trading profit rose 12%, benefiting from the improved performance in Nigeria, the consolidation in Zimbabwe of the Hunyani divisions as well as the consolidation of Bullpak, which was previously a joint venture. We delivered a very creditable safety performance, with an LTIFR of 0.2.

In Kenya, demand for self-opening bags for the milling industry was reasonably stable. Even though a number of competitors have recently entered this market, Bullpak had another good year.

Notwithstanding the current macro-economic problems, demand for cigarette packaging in Nigeria was buoyant, particularly in the second half. However, demand for general commercial paper packaging remained subdued.

Sorghum beer carton sales in Zambia were weak, as a result of both generally depressed demand and the substitution of paper cartons into rigid plastic packaging formats. Our financial results in this market were also affected by the highly volatile exchange rate in the year.

Even though Zimbabwe experienced very difficult macro-economic conditions and there were concerns about customers’ liquidity, our paper operations in that country performed well. This was thanks to a reasonable crop of tobacco, which is packaged in large corrugated boxes. Our performance was also assisted by the greater substitution of imports with locally produced products as well as our cost-saving initiatives, in line with the strategic imperative to manage costs stringently.

In Malawi, sales to the sorghum beer industry remained strong and we had a good year operationally. A higher tobacco crop contributed to increased tobacco case sales in the second half.

Looking ahead

In the year ahead, we expect the market for paper to remain buoyant in the Rest of Africa markets. The restrictions on imported products in Nigeria and Zimbabwe are expected to further encourage the local sourcing of packaged goods. In Zambia, we expect an improved sorghum beer carton performance on the back of a number of interventions. Liquidity constraints in Nigeria and Zimbabwe remain a concern.