Limited availability of foreign currency to import critical raw material continues to constrain the country’s largest packaging company, Nampak Zimbabwe, resulting in failure to meet customer orders, managing director John Van Gend told shareholders on Wednesday.
Van Gend said demand for the group’s products is firm across all sectors, but foreign currency shortage has meant the group cannot satisfy market demand.
Carnaud Metalbox (CMB) has been hardest hit by the lack of foreign exchange, and have from time to time run out of the necessary raw materials for production, particularly in the metals business.
The company has not been able to fully supply beverage crowns, as well as paint and food cans.
“The single most significant issue holding the company back is the lack of raw materials, which of course comes back to the lack of foreign currency liquidity,” said Van Gend whose company needs at least $3 million a month to be able to import raw materials.
He said major shareholder Nampak Holdings (South Africa), though still providing technical and logistical support, has put a lid on further financial support as it is now owed millions of dollars.
Major shareholder Nampak Holdings, who is also the major creditor, reviewed and subsequently limited its support at the commencement of the third quarter 2018, in an effort to curtail escalating exposure.
As at September 30, 2018, Nampak Zimbabwe owed its major shareholder Nampak South Africa $69,5 million with $37,3 million related to purchases made from the parent company.
“Due to non-payment of our creditor and loan accounts with Nampak Holdings, they had no choice but limit further external financial support until such time as we make inroads into the repayment of outstanding liabilities.”
Van Gend, however, said the relevant authorities were not forthcoming with the much needed foreign currency as there has been no flow of funds despite having made progress in resolving the problem.
Turns to export market for forex
With very little to suggest an improvement in the availability of foreign currency, Nampak Zimbabwe is now looking at developing export markets and has already made inroads in Malawi and DRC. The target is to grow exports by 30 percent from current levels.
“We are continuing to develop export markets for our products, and have grown our exports into the region, particularly Malawi and the DRC, significantly over the last 12 months,” Van Gend said.
He, however, said these exports are not yet enough to fund full raw material import requirement.
One of Nampak’s units that has developed export markets is Mega Pak, which has since sold Preforms and Closures into the DRC.
“Having received coke approval for our 1881 closure, the resulting export markets developed have taken capacity utilisation of this line close to 100 percent. We are currently evaluating a project to increase capacity in this area of operations,” he said.
Strong demand across board
Despite continued struggle to access foreign currency, Van Gend said all of the Group’s units are currently trading profitably with demand also firm across all sectors of the Group.
Overall turnover for the first quarter to December 2018, was ahead of the comparable last year by 13 percent.
Hunyani started the year positively, with volumes ahead of the prior year amid strong tobacco case sales into Malawi at the start of the year.
Van Gend said demand for local commercial corrugated products remains high but was being hampered by lack of sufficient raw materials.
Mega Pak has also started the new financial year strongly, matching the results of last year, which was a record year for the unit.
At Carnaud Metalbox, the plastic sector of the business remains robust, and management has been able to increase capacity in both its injection and blow moulding sections to meet the growing demand in the dairy and dairy related products.