Nampak Zimbabwe is currently focusing on cost-containment measures as the operating environment, worsened by policy changes and currency instability, ocassion challenges.
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Tawanda Karombo
Nampak has concluded agreements for the disposale of its Zimbabwean unit with the transaction now subject to suspensive conditions.
Through Nampak Southern Africa, the South African packaging manufacturer is disposing of Nampak Zimbabwe to TSL, a Harare-based logistics and processing company.
“Regarding the proposed disposal of a 51.43% shareholding in the Company by Nampak Southern Africa Holdings Limited, shareholders and the investing public are advised that the seller and TSL Limited have concluded a sale and purchase agreement in respect of the sale, which agreement remains subject to various suspensive conditions,” Nampak Zimbabwe said on Wednesday.
It is expected that Nampak Zimbabwe will make an announcement of the complete disposal in the next few weeks.
TSL is acquiring Nampak Zimbabwe for a purchase consideration of $25 million.
In compliance with the Companies and Other Business Entities Act and the Zimbabwe Stock Exchange Listings Rules, TSL is required to make an offer to the remaining shareholders of Nampak Zimbabwe.
It recently confirmed that “it has the capacity to undertake the Mandatory Offer within the regulated timeframes, through settlement by either cash or by way of a share swap” using its own shares.
“The mandatory offer will be implemented by the purchaser independently, following the implementation of the disposal and without any involvement of Nampak,” Nampak Zimbabwe recently said.
The rationale for the disposal of the Zimbabwe unit has been described as beimg “in accordance with Nampak’s asset disposal plan”.
Nampak Zimbabwe is currently focusing on cost-containment measures as the operating environment, worsened by policy changes and currency instability, ocassion challenges.
John van Gend, Nampak Zimbabwe managing director has said that “the operating environment in Zimbabwe is undeniably complex, impacted by policy changes and currency” instability.
Zimbabwe has just made currency policy changes that are likely to impact timeous reporting by companies. While Nampak said it had transitioned to US dollar financial reporting, the Reserve Bank of Zimbabwe has directed that all companies use the local currency for all company reporting.
Van Gend expects that the government of Zimbabwe “will take decisive steps to effectively address the increasing risks of company closures and retrenchments” that have escalated in the past few weeks.
To survive the country’s economic downturn, Nampak Zimbabwe will be be focusing “on cost-containment measures to protect margins and drive profitability across” its operations.
During the quarter to the end of December, the company saw demand for packaging material face pressure due to intensified competitor activity. Moreover, it was affected by disruptions to supply chains due to the civil unrest in Mozambique.
“We encountered supply chain disruptions with raw materials arriving via Beira Port, stemming from the political unrest in Mozambique following the disputed election results. Although the raw materials were ultimately received, the delays impacted our delivery capabilities during the festive season,” said Van Gend.
However, it is the yet to be resolved Zimbabwean economic challenges that the company expects to further affect demand, as the wholesale and retail sectors navigate considerable branch closures that threaten the sustainability of businesses.
During the quarter under review, Nampak Zimbabwe reported 23% lower revenues in US Dollar terms while trading profit for the period declined by 56%.
“This decrease in revenue reflects the reduced demand across all business units,” said the company.
The quarter period under review was fraught with fluctuations in exchange rates following a significant depreciation of the local currency.
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