Packaging group Nampak Limited, which is listed on the Johannesburg Stock Exchange, has decided not to resume dividend payments to shareholders as Zimbabwe’s currency crisis lingers and because of a delay in the sale of its glass business.
Nampak Limited, which reported a 9 percent decline in profit from continuing operations, said it would not pay dividends “until the sustainability of cash transfers from Zimbabwe is assured and the disposal of the glass business is finalised”.
Nampak Limited is the major shareholder in Nampak Zimbabwe, which is listed on the Zimbabwe Stock Exchange and is the country’s leading packaging company with Delta Corporation as one of its major customers. Its subsidiary Hunyani Limited is also a major supplier of packaging material in the tobacco sector.
“The board is evaluating the various options available with a view to enhancing shareholder value,” it said.
It said the availability of foreign currency in Zimbabwe “remains challenging” and only R27 million, or 2 percent, of the opening cash position was transferred from Zimbabwe in the five months to February 2019.
Nampak said the rand value of its cash balances in Zimbabwe plunged to R466 million, from R1,2 billion at the end of September 2018, as the country’s currency devalued.
Appearing on CNBC, André de Ruyter, CEO of Nampak Limited said Zimbabwe is “very difficult to read at this point in time”.
“Following the introduction of the RTGS dollar as the formal official currency as opposed to the US dollar, there has been a devaluation in the currency.
“The black market rate is significantly below the official rate, we have taken a very conservative approach to our cash in Zimbabwe, we have written it down to R466 million.
He however, said the company had hedged the cash with a sovereign entity that guarantees the 1:1 parity.
De Ruyter said Nampak will remain operating in Zimbabwe as volumes have remained remarkably strong.
“This is an economy that has been extremely resilient. Zimbabweans consumer is inventive and innovative and we still are able to use our facilities which are very well run and are competitive to export to other countries.
He said exposure to the country’s second single largest export earner tobacco was also a plus for the Group and a reason to continue operating in the country.