Fri, 27/03/2015 - 12:30
Current Issue 77
Unlocking Value Across Africa
Already established as the packaging leader in Africa with operations in 11 African countries outside of SA, Nampak continues to take advantage of the continent’s upward growth trajectory
Writer: Emily Jarvis
Project Manager: Ben Wigger
Since its inception more than 50 years ago, Nampak Bevcan has demonstrated its capabilities in the manufacture and supply of beverage cans across the African continent to become known as one of Africa’s leading lights.
Throughout this prosperous existence, the company’s footprint has gradually grown to include surrounding markets such as Namibia, Botswana, Zimbabwe, Mozambique, and most recently Angola and Nigeria.
Throughout its operations, the launch of the “buy better, make better, sell better” business improvement initiatives, as well as concerted efforts to improve the company safety record continue to drive Nampak forward. In 2014, the Group achieved a Level 3 BBBEE rating, an improvement on the Level 4 rating in 2013.
In South Africa, the business environment is set to remain challenging this year, however, Nampak will continue to focus on ways to unlock value from its base business. Efficiency gains from the conversation of many of its beverage can lines to aluminium from tinplate, as well as from the new glass furnace, are expected to contribute earnings in the year ahead.
Moreover, Nampak is strategically well-placed in the rest of Africa, with strong market positions and a growing presence. The Group is pursuing its strategic objective to accelerate growth in the rest of Africa to ensure that this side of the business contributes to sustainable earnings growth in the long term.
Bevcan Nigeria acquisition
The packaging company reported a 10 percent increase in Group revenue for the year ending September 2014, in line with growth expectations. Furthermore, Nampak said trading profit from the rest of Africa increased by 25 percent to R616 million mainly due to the contribution of the newly acquired Bevcan Nigeria and the continued strong performance from the Angola beverage can operation.
Nampak’s CEO commented that “the acquisition will significantly increase Nampak’s presence in Nigeria which is Africa’s second largest economy”.
Alucan Packaging is situated in the Agbara industrial area which Nampak said was “an ideal location” close to Lagos and to major beverage producing customers as well as having “a reliable source of gas which will be used for heating and power generation”.
“Nigeria, with a population of more than 170 million people, has experienced good growth in demand for beverage cans and this is expected to continue. The acquisition and the potential to acquire the plastics company will further contribute to our stated growth strategy in the rest of Africa,” the CEO adds.
Not content with this regional dominance, Nampak Bevcan continued to increase its geographical reach. According to Erik Smuts, Group Executive of Beverage Cans at Nampak, the business aspires to be “the preferred supplier of beverage packaging in Sub-Saharan Africa”. Although this might sound like an ambitious statement, recent developments mean this target should become a reality.
“We have built a plant in Angola, which has been operating for more than three years and as of last year has a second production line installed. The newly acquired Bevcan Nigeria also plays an equal part in our success. As there will be a lot of focus getting this business up and running, there are exciting times ahead,” Smuts highlights.
Although continued growth across Africa will undoubtedly give Nampak Bevcan a distinct competitive advantage over manufacturing alternatives, the company has several other strengths to call upon. “We have proved in South Africa, where we do not always have ideal conditions to operate, that we manage to work with what is available,” explains Smuts. “Despite our successes, we have huge respect for the other global can makers, and we know that we will have to be at our best in order to defend our position.”
This resolute and determined attitude has put Nampak Bevcan in good stead for its Angolan operation as Smuts explains: “We operate in a place where there is very little infrastructure. We generate our own electricity and tanker in all of the water we require. But we are used to operating in areas where it is tough and you can’t always rely on external service providers other facilities or suppliers. This is critical to our competitive nature and we intend to drive this further to make sure we become even more successful in these areas.”
Despite the operational difficulties in Africa, Smuts believes that Nampak Bevcan has managed to position itself in line with some of the industry’s biggest beverage can manufacturers. “In South Africa we are more competitive in our pricing than Europe and many other developed countries in the world.
“What makes us different is our strong relationships with customers, good service and a competitive offering. Our adventurous nature and an aggressive cost reduction attitude are also strong characteristics,” he reveals.
Enhancing the business
Regardless of its current market position, Nampak continually looks to improve and enhance its day-to-day activities. “In South Africa, we used to exclusively produce tinplate beverage cans, but we started a conversion to aluminium in 2013 due to customer-driven industry trends and technological advances,” cites Smuts.
For Smuts, this latest move will go a long way to improving the recycling rate of beverage cans across South Africa. In fact, he believes that South Africa can achieve levels similar to that of Brazil, which currently has a collection rate of more than 98 percent. “We have a sister company called Collect-A-Can, which is a partnership between ArcelorMittal and Nampak that facilitates the collection of cans,” he says.
“The recycling rate we have achieved in South Africa for used beverage cans is more than 72 percent, which is the highest collection level for any beverage packaging format in Southern Africa, so we are very proud of this achievement. But with the introduction of aluminium beverage cans, which have a higher intrinsic value, we expect that collection rate to increase.”
Furthermore, Nampak Bevcan remains committed to sustainability in other areas of the business and has gone through quite a large capital reinvestment programme to become more environmentally friendly. “The introduction of new equipment has enabled us to significantly cut down on energy consumption.
“The overall carbon footprint of the business is coming down rapidly and we have very aggressive targets going forward to reduce this even further,” Smuts emphasises.
Looking forward, Nampak Bevcan is looking to expand its footprint in Africa even further and will consider wider opportunities too, as long as they make good business sense for both our customers and our shareholders. Whatever the future has in store for Nampak Bevcan, you can be sure that product quality and customer satisfaction will remain key concerns for the business.