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Johannesburg - Capital expenditure in key growth areas at Nampak [JSE:NPK] means the best is yet to come for the packaging giant, said an analyst.
Following the release of its interim results to end-March on Thursday, Nampak shares moved over 5% higher on the JSE.
Nampak makes packaging out of metal, glass, paper and plastics and is the biggest group of its kind in Africa.
The company reported a 16.3% increase in headline earnings per share to 77.8 cents in the reporting period, despite a 7% fall in revenue to R9.4bn.
The revenue drop came on the back of a lower volumes as well as exchange rate losses incurred when Nampak's European and African operation earnings were translated back into rands.
"Despite currency headwinds, the European and African operations did well," said Jason Kombo, analyst at Coronation Fund Managers.
Operating profit jumped 13% to R799.6m.
The main reason for Nampak's strong first-half bottom line is cash generation, which was R822.5m for the period under review.
This number represented a 24% drop from the same period a year ago, but the decline is attributable to an increase in working capital as a result of creditor payment timing and a fall in receivables.
Meanwhile, prudent cash management is evident in the halving of capital expenditure to R346m, as well as a cut in dividends and distributions from R421.7m in March 2009 to R140.8m in the most recent period.
Restrictions in capex and payouts have also contributed to the a decline in the group's net debt to equity ratio, from 52% last year to 50% in March 2010.
Despite the capex cut, Nampak has invested in two future earnings enhancing projects - a recently completed glass plant and a beverage can factory in Angola. "The benefits of these investments haven't come through yet," said Kombo. "I am optimistic about their future prospects."
Meanwhile, Nampak said it did not expect losses at its European operations in the second half of the 2009 financial year to recur.
"The board expects a considerable improvement in earnings for the year ending September 2010," said the group in a statement.
An analyst told Fin24.com that Nampak's earnings are seasonal, with volumes peaking over the summer months.
This implies that although the earnings will be an improvement on 2009, the first half is likely to outperform the second unless the benefits from the glass and Angolan capex spend filter make an early and significant contribution to the bottom line.
- Fin24.com
Following the release of its interim results to end-March on Thursday, Nampak shares moved over 5% higher on the JSE.
Nampak makes packaging out of metal, glass, paper and plastics and is the biggest group of its kind in Africa.
The company reported a 16.3% increase in headline earnings per share to 77.8 cents in the reporting period, despite a 7% fall in revenue to R9.4bn.
The revenue drop came on the back of a lower volumes as well as exchange rate losses incurred when Nampak's European and African operation earnings were translated back into rands.
"Despite currency headwinds, the European and African operations did well," said Jason Kombo, analyst at Coronation Fund Managers.
Operating profit jumped 13% to R799.6m.
The main reason for Nampak's strong first-half bottom line is cash generation, which was R822.5m for the period under review.
This number represented a 24% drop from the same period a year ago, but the decline is attributable to an increase in working capital as a result of creditor payment timing and a fall in receivables.
Meanwhile, prudent cash management is evident in the halving of capital expenditure to R346m, as well as a cut in dividends and distributions from R421.7m in March 2009 to R140.8m in the most recent period.
Restrictions in capex and payouts have also contributed to the a decline in the group's net debt to equity ratio, from 52% last year to 50% in March 2010.
Despite the capex cut, Nampak has invested in two future earnings enhancing projects - a recently completed glass plant and a beverage can factory in Angola. "The benefits of these investments haven't come through yet," said Kombo. "I am optimistic about their future prospects."
Meanwhile, Nampak said it did not expect losses at its European operations in the second half of the 2009 financial year to recur.
"The board expects a considerable improvement in earnings for the year ending September 2010," said the group in a statement.
An analyst told Fin24.com that Nampak's earnings are seasonal, with volumes peaking over the summer months.
This implies that although the earnings will be an improvement on 2009, the first half is likely to outperform the second unless the benefits from the glass and Angolan capex spend filter make an early and significant contribution to the bottom line.
- Fin24.com
