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Covid can fest for Nampak

Nampak, Africa’s biggest and somewhat beleaguered packaging manufacturer, is enjoying a surge in demand for its aluminium beverage cans as booze drinkers take their favourite drinks home – in a can.

The group says home-consumption demand for the cans has grown sharply in North America and Europe, due to Covid-19 lockdowns. The cans are a particular favourite with beer producers and demand has outstripped supply in those regions.

Last year, the group announced that it had won two substantial renewed contracts for the export of its beverage cans to multinational companies. The packaging company’s CEO, Erik Smuts, told investors at its annual general meeting (AGM) this week that the contracts resulted from the increase in home consumption, especially in North America

In South Africa, he said the trend had “sadly failed” to take off due to the hard lockdown and the ban on the sale of alcohol, but that could change because consumers appear to be preparing themselves better for more dry days.

“It appears as if consumers are starting to deploy different strategies against potential alcohol bans. We have seen a trend of people starting to stock more product when they see the [Covid-19] infections rising and we do have a suspicion that we are seeing the benefit of it,” Smuts said.

Home consumption has fuelled an already growing demand for environmentally friendly aluminium cans versus plastic packaging and Nampak has been priming itself for this.

Research by US-based aluminium packaging company Ball Corporation places global demand for beverage cans at more than 100 billion units by 2025.

Troublesome balance sheet

Although it is positioning itself to take advantage of the aluminium beverage can boom, the group is still focused on balance sheet, which has not been looking its best. Nampak has operations in 11 African countries, including South Africa, and produces plastic and paper packaging in addition to metal packaging.

But its performance has been dragged down by macroeconomic volatility in its operations on the continent – particularly in Angola, Zimbabwe and Nigeria – and it has a R6.2 billion debt pile, up from R5.5 billion in 2019. The group, whose share price closed at an increase of more than 4% on Tuesday, after the AGM, has seen its stock decline by more than 82% over the past five years. Read the full article here