Nampak Limited · JSE:NPK
Nampak — Investor Day (September 2015)
93 slides from Nampak's investor day presentation, Sep 17, 2015
Slide 1: Investor Day 2015
2015 Investor Day 17 September 2015
Slide 2: Agenda for the day
Agenda for the day 2 Time Activities Venue 07:30 – 08:00 Arrival and registration The Forum at The Campus 57 Sloane Street Breakfast Bryanston Presentations: 08:00 – 08:40 1. Welcome and setting the scene (André de Ruyter, Nampak CEO) 08:40 – 09:20 2. Bevcan (RSA and RoA) update (Erik Smuts, Executi
Slide 3: Investor Day – André de Ruyter, CEO
2015 Investor Day André de Ruyter Nampak CEO 17 September 2015
Slide 4: Forward looking statements
We may make statements that are not historical facts and relate Forward looking to analyses and other information based on forecasts of future 4 statements results and estimates of amounts not yet determinable. These are forward-looking statements as defined in the U.S. Private Securities Litigation
Slide 5: The environment in which we operate
The environment in which we operate 5 Nampak is navigating … but the medium term picture remains attractive a challenging environment We face tough … but we understand the factors we can’t control macroeconomic conditions and we track and mitigate these risks We have experienced … but Nampak is retu
Slide 6: Strategy remains unchanged
Strategy remains unchanged 6 Unlock further value Accelerate from base business African growth › Active portfolio management, › Growth through greenfield including possible divestitures investment and acquisitions in › Stringent cost management metals, glass and plastics › Working capital management
Slide 7: Update on Nampak's journey to growth and improved results
Update on Nampak’s journey to growth and improved results 7 Rest of Africa growth 2020 Targets › Potential acquisitions were declined: › EBITDA multiples much higher than Nampak’s threshold › forgoing due diligence not an option for Nampak DIFR: 0.3 › commercial conditions not met › Focus on greenfi
Slide 8: Key focus areas
Key focus areas Returning to the basics of manufacturing 8 Safety Working capital management › Reduce DIFR to 0.3 from 1.2 (2014) › Reduce working capital levels and minimise cash impact › Optimise value chains through improved planning and optimisation › Manage forex exposure Operations excellence
Slide 9: Successful project evaluation and execution key to performance
Successful project evaluation and execution key to performance 9 › Introduced a new discipline to capital allocation and enforced clear hurdle rates for new projects and innovations › Group wide project management system ensures alignment and discipline › Focused project pipeline – ROIC and hurdle r
Slide 10: Marketing excellence initiatives implemented
Marketing excellence initiatives implemented 10 › Sales and marketing excellence to maximise gross margin by optimising unit price and volume › Key for Nampak is to: » Sell all products profitably › DivFood embarked on a project to rationalise customers and SKUs (Stock Key Units) in 2014 » Reduce ac
Slide 11: Robust pipeline of high growth, high value opportunities in SSA
Robust pipeline of high growth, high value opportunities in SSA 11 CONCEPT FEASIBILITY PLANNING EXECUTION DEVELOPMENT › Angola Bevcan FINAL INVESTMENT DECISION Line 2 › Angola Glass › Angola Bevcan › Ethiopia Glass (Greenfield) Line 3 (Greenfield) › Rosslyn Bevcan Line 1 › Nigeria Bevcan › Nigeria G
Slide 12: Strong new leadership team driving culture change
Strong new leadership team driving culture change and pulling the right levers to improve performance 12 › Culture change at Nampak: from “hands off” holding company to a “hands on” supportive, collaborative and internally aligned operating company that performs as a single unit › New leadership in
Slide 13: Nampak investment proposition
Nampak investment proposition 13 Solid foundation Compelling African business growth story › Strong cash flow from base › Africa’s largest packaging business company with operations in › Offers packaging across the South Africa and 12 countries major packaging substrates in the rest of Africa (metal
Slide 14: Future targets
Future targets 14 R1 billion per annum CAPEX next two years GLASS PTM 80% – 85% starting FY16 BEVCAN SPOILAGE ~ 4 – 5% GROUP MARGIN 10 – 12% average per annum
Slide 15: Summary
Summary 15 › Our strategy is unchanged and delivering results › We are focusing on our core excellence as a high-performance manufacturer › We have the right leadership team in place to execute our strategy in a challenging environment. › We are on track to deliver significantly improved financial p
Slide 16: Thank you
Thank you
Slide 17: Countering the risks and challenges of doing business in Africa
Countering the risks and challenges of doing business in Africa 17 › Political and country risk › Fiscal and monetary risk » Countries in which Nampak does » Nampak business predominantly done business have relatively lower in local currency linked to the US$ political risk » Brewers import between
Slide 18: Nampak Bevcan
Nampak Bevcan Erik Smuts Group Executive: Bevcan 17 September 2015
Slide 19: South African beverage can market evolution
South African beverage can market evolution 19 › Strong volume growth in › Contract renegotiation (2010 – 2012) early ’90s » Invitation to competitors by major customers » Additional capacity installed to establish production capacity in RSA and competitor entry » Contracts awarded to Bevcan › Pack
Slide 20: Strategic areas of focus
Strategic areas of focus 20 | 20
Slide 21: Key initiatives to deliver strategy
Key initiatives to deliver strategy 21 › Assets » Investments in technology » South Africa footprint consolidation » Expansion of revised footprint › “Buy Better” » Improved cost structures › “Make Better” » Operational excellence » Quality of people – skills › “Sell Better” » CAN DO! Marketing camp
Slide 22: Competitive advantage
Competitive advantage 22 › Largest beverage can manufacturer in Africa provides local economies of scale › Strong market position with in-depth knowledge of local market dynamics › Well established footprint › Proven track record – trusted supplier › Long term contracts with major customers to suppo
Slide 23: Investment update
Investment update 23 Motivation Status Expansion projects › Customer › Previously Completed › South Africa preference » Springs Line 1 » Rosslyn Line 2 › Technological (New Line) New high speed advances » Springs Line 2 aluminium line (Previous Tinplate Line) All size capability › Overall cost r
Slide 24: Beverage can capacity South Africa
Beverage can capacity South Africa 24 Historic Current Future Potential SOUTH AFRICA Springs Line 1 (All sizes) Alu 900m 900m 1 000m Line 2 (330ml) Alu 700m 1 000m 1 000m 1 000m Line 3 (330ml/440ml/500ml) Alu 750m 900m 900m 1 000m Rosslyn Line 1 (All sizes) Alu Nil 1 000m 1 000m 1 000m Line 2 (All s
Slide 25: Total beverage can capacity
Total beverage can capacity 25 Historic Current Future Potential SOUTH AFRICA 3 650m 5 000m 5 500m 6 000m Angola Line 1 (330ml) 700m 750m 750m 1 000m Line 2 (All sizes) 1 000m 1 000m 1 000m ANGOLA – SUBTOTAL 700m 1 750m 1 750m 2 000m Nigeria Line 1 (330ml) 1 000m 1 000m 1 000m Line 2 (All sizes) 900
Slide 26: Volume growth since 2012 South Africa
Volume growth since 2012 South Africa (all sizes – for filling in RSA) 26 Growth past 12 months +12%
Slide 27: Volume growth since 2012 Value packs 440ml
Volume growth since 2012 Value packs 440ml 27 Growth past 12 months +30%
Slide 28: Volume growth Angola and Nigeria
Volume growth Angola and Nigeria 28 Angola › Shortage in forex resulting in increased demand for locally produced products › Negotiations in progress with major CSD customer » Current European supply contract ends at the end of 2015 » Invited to meeting to discuss long term supply contract » Trial r
Slide 29: Nampak Bevcan estimated market shares
Nampak Bevcan Estimated market shares 29 Nigeria ±32% East Africa ±33% Angola ±56% (only local producer) Southern Africa 100%
Slide 30: Operational update South Africa
Operational update South Africa 30 › New technology and higher speed lines highlighted skills shortages › Excessive spoilage experienced in Springs › Operational consultants utilised in identifying specific process deficiencies › Technical specialists assisting in focused areas › Spoilage levels in
Slide 31: Operational update Angola and Nigeria
Operational update Angola and Nigeria 31 Angola › Steel line continued to operate well above design specifications › Aluminium line commissioned during May 2015 › Operating above learning curve expectations › Very good spoilage learning curve › Capacity now available to supply remainder of market Ni
Slide 32: Key market issues
Key market issues 32 › Volume growth still strong in RSA › Further RSA customer consolidation » Coca-Cola Bottling Africa – potentially good for can volume growth › Duty applications by local metal suppliers » Limited exposure due to sourcing strategy › Impact of low oil prices in Angola and Nigeria
Slide 33: Conclusion
Conclusion 33 › Strategy remains on track – and is in execution mode › Nearing the end of the “structural change” programme › New technology has highlighted skill shortages, but being addressed › Strategy delivered exceptional volume growth to date, well in excess of GDP growth › New footprint allow
Slide 34: Thank you
Thank you
Slide 35: Nampak DivFood
Nampak DivFood Christiaan Burmeister Group Executive: DivFood and R&D 17 September 2015
Slide 36: Competitive environment
Competitive environment 36 Competitive dynamics › Nampak DivFood the only two-piece (% of total market) food can manufacturer in South Africa Major market Nampak Local Imports › Fruit volume secured with key categories competition customer from 2016 onwards Food cans (2 and 3 piece) 63 20 17 › Long
Slide 37: Majority of the market doing well despite challenging macroeconomic dynamics
Majority of the market doing well despite challenging macroeconomic dynamics 37 Different markets are influenced by different drivers. GDP growth, consumer behaviour, weather patterns, agricultural harvest, fish quotas and exchange rates
Slide 38: The DivFood change imperative
The DivFood change imperative 38 › DivFood’s profitability decreased since 2007 › Driven by the following factors: » Emergence of low cost competition, cherry picking and eroding volume » Large customers encouraging competition, driving down price » Historic underinvestment in new technology manufac
Slide 39: An improvement programme based on 5 strategic pillars
An improvement programme based on 5 strategic pillars implemented in 2014 39 1. The business is now organised along major markets in business units and we understand the profitability of each of these. 2. We are establishing leaner and focused production units by investing in modern and appropriate
Slide 40: Pillar 1: Business unit focus on profitability
Pillar 1: Business unit focus on profitability 40 › The various Business Unit areas have different customers, competitive pressures, technology requirements and product dynamics › Profitability is now being measured at a business unit, customer and item level › Business unit managers appointed to ma
Slide 41: Pillar 2: Manufacturing footprint and planned investment programme
Pillar 2: Manufacturing footprint and planned investment programme – investment to compete 41 Current 2015 – 2016 2016 – 2017 Future Approved Feasibility Manufacturing Manufacturing Equipment Footprint Footprint age (Yrs) (Rm) (Rm) Food 47 Mostly 20 – 30+ <31 Diversified 149 Mostly 20 – 40+ <74 Coil
Slide 42: Pillar 3: Simplify the business offering
Pillar 3: Simplify the business offering 42 › Some business units have a large customer base and broad product offerings › Competitors being very selective: Long run (volume), discrete focus › Complexity adds costly business processes (high direct and indirect costs) › Busy rationalising customers a
Slide 43: Pillar 4: Improved tinplate supply and DR access
Pillar 4: Improved tinplate supply and DR access 43 › Progress » Improved local supply reliability, still some quality challenges » Solid international supply chain established from a number of mills, with attractive terms » Double Reduced (DR) plate usage progressing well across division in line wi
Slide 44: Pillar 5: Appropriate level of support services
Pillar 5: Appropriate level of support services 44 › Current split is 60% direct manufacturing, 40% indirect employees supporting the business › Significant workload on support services during the technology investment programme given the requirements and magnitude of change › Investigating the poss
Slide 45: Conclusion
Conclusion 45 › DivFood has a strong market position and enjoys good relations with our customers › Despite the execution of a challenging operational improvement plan, the business performance is on par with 2014 and in line with 2015 expectations › Business and operations improvement initiatives w
Slide 46: Thank you
Thank you
Slide 47: Nampak Glass
Nampak Glass Pieter van den Berg MD, Nampak Glass 17 September 2015
Slide 48: Market analysis South African market
Market analysis South African market (tons as a %) 48 Nampak Glass share of individual sectors % Share Beer 18 Soft drinks/juice 44 3 3 Beer 6 FABS 25 Flavoured alcoholic 7 beverages (FABS) Wine 15 38 Wine Spirits 67 9 Food Food 41 Spirits Soft drinks/juice Tableware 0 15 Cosmetics Cos
Slide 49: Market under pressure – little impact on Nampak's sales volumes
Market under pressure – little impact on Nampak’s sales volumes 49 tons › Market demand has been in decline but now recovering 1 200 › Forecast indicates growth driven by 1 000 wine and food products › Nampak’s market share has increased 800 with the ramp-up of Furnace 3 › Nampak volume growth not 6
Slide 50: Looking back: The peak October 2014 – February 2015
Looking back The peak October 2014 – February 2015 50 › Commissioned Furnace 3 in peak in August/September 2014 » construction started three months late due to delayed signing of commercial contracts › Low stock levels and increased complexity of new work › Short runs to service immediate demand (jo
Slide 51: Key short term operational interventions
Key short term operational interventions 51 Intervention Status Stabilised supply and relationship with key customers relationship Achieved Management change and filling of key operational skill positions Complete Stabilise relationship with workforce Achieved Utilise additional technical support fr
Slide 52: Current average pack-to-melt (PTM) close to target
Current average pact-to-melt (PTM) close to target | 52 100 90 Target: 80% 80 70 60 50 40 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Presented by Corrie Botha
Slide 53: Where are we now September 2015
Where are we now September 2015 53 › Significant improvements in factory performance » Structure stability, all key positions filled » Operational efficiencies improved and now acceptable » Stock build in preparation for 2015 peak » Positive feedback from the market on quality and service » Job and
Slide 54: Nampak Glass then and now
Nampak Glass then and now 54 2012 2016 and beyond › Two furnace operation › Three furnace operation › 195 000t installed capacity › 285 000t installed capacity › ±18% market share › ±28% market share › Market share not sufficient to be material › Ability to optimise colour campaigns (three strategic
Slide 55: Our competitive advantage
Our competitive advantage 55 › Lower cost producer » Well capitalised equipment » One site production benefits from economies of scale » World class energy efficiency » Product portfolio fits operations strategy › Strong relationships with key customers › Increased product offering with expanded cap
Slide 56: Conclusion
Conclusion 56 › Short term issues of 2014/2015 resolved, operation stable, safe and reliable › Key learnings and preventative measures put in place › For Nampak Glass, the market is not demand constrained › Medium term outlook positive › World class energy efficiency and highly competitive cost base
Slide 57: Thank you
Thank you
Slide 58: Nampak in the Rest of Africa
Nampak in the Rest of Africa Rob Morris Execute: Glass and Rest of Africa 17 September 2015
Slide 59: The rest of Africa strategic intent
The rest of Africa strategic intent 59 The rest of Africa to generate 50% of Nampak trading profit by the year 2020
Slide 60: Rest of Africa trading profit growth
Rest of Africa trading profit growth 60 R million › Growth through greenfield investment Bevcan Nigeria and acquisitions in metals, glass and 700 acquisition rigid plastics 616 Bevcan Angola ramp-up › Partner with major multinational 600 to full capacity and strong customers performance from paper a
Slide 61: Rest of Africa contribution to trading profit increased
Rest of Africa contribution to trading profit increased from 8% in 2011 to 38% in 1H2015 61 REVENUE Revenue (%) (%) 10 11 8 South Africa Rest of Africa 27 United Kingdom 62 82 2011 1H2015 TRADING PROFIT Revenue (%) (%) 5 10 6 8 7 South Africa Rest of Africa 44 United Kingdom Corporate
Slide 62: Rest of Africa operations contribute to profitability
Rest of Africa operations contribute to profitability 62 Our competitive advantage › Established regionalised production footprint › Strong customer and stakeholder relationships › 15+ years experience in most African countries Rest of Africa › Familiar with challenges of doing 15 business in areas
Slide 63: Nampak operations in Africa
Nampak operations in Africa 63 Ethiopia, 1 Kenya, 1 Nigeria, 3 Tanzania, 1 Angola, 1 Malawi, 1 Zambia, 2 Mozambique, 1 Botswana, 1 Zimbabwe, 3 South Africa, 28
Slide 64: Future growth through greenfields, acquisitions and organic expansion
Future growth will be driven through greenfields, acquisitions and organic expansion 64 Food and Paper other carton Plastic Bev cans/ and Liquid bottles cans drum Crown labels Corr Sack carton and jars Closure Crate Glass South Africa X X X X X X X Ethiopia X X X X Angola X X Nigeria X X X X X X X K
Slide 65: The rest of Africa contribution to group results
The rest of Africa contribution to group results 65 Rest of Africa percentage contribution to group profits 40 35 30 25 20 15 10 5 0 2009 2010 2011 2012 2013 2014 1H 2015 Revenue Trading profit
Slide 66: Current key issues
Current key issues 66 2015 a challenging year Managing currency fluctuations › Oil price drop and › Direct impact subsequent impact on » Debt / creditors: limited hard currency exposure Nigeria and Angola » Cost recovery from customers: limited currency › Elections and new volatility exposure due to
Slide 67: Where we have operations: Angola and Mozambique
Where we have operations Angola and Mozambique 67 › Luanda – beverage can operation » 1st tin plate Line commissioned in 2011 » 2nd beverage can line (aluminium) commissioned May 2015 » Duties gazetted, not yet imposed » Good volume opportunities › Maputo – crowns operation » Considering closure of
Slide 68: Where we have operations: Nigeria
Where we have operations Nigeria 68 › Lagos › Ibadan › Agbara » Metals factory » Cigarette cartons factory » Beverage cans » Acquired 57% in 2002 » Commissioned 2005, » Acquisition March 2014 » Acquired minority interest 2009 expanded into in 2011 commercial cartons
Slide 69: Operational update Nigeria
Operational update Nigeria 69 › Lagos › Ibadan › Agbara » Subdued first half but good » 2015: volumes down due » Volume ramp up in line recovery evident after to customer stock reduction with expectations elections » Volumes recovering well in » Minimal impact of macro 2H calendar year issues on vol
Slide 70: Where we have operations: East Africa
Where we have operations East Africa 70 › Kenya (Nairobi) › Tanzania (Dar es Salaam) › Ethiopia (Addis Ababa) » Metals and paper factory » Metals and drums » Acquired 25% of Ethiopia » Acquired 100% of Bullpak Crown Cork in 2002 in 2014 » Crate operation being commissioned
Slide 71: Operational update East Africa
Operational update East Africa 71 › Nairobi (Kenya): › Dar es Salaam (Tanzania): › Addis Ababa (Ethiopia): Metals and paper sacks Metals and drums Metals and crates » Agricultural related volumes » Market in beverages » Installation of crate line for impacted by erratic weather very subdued East Afr
Slide 72: Southern Africa
Southern Africa 72 › Six Manufacturing operations » Blantyre (Malawi) Paper » Maputo (Mozambique) Crowns » Lusaka (Zambia) Various » Harare (Zimbabwe) Various – three operations
Slide 73: Nampak Zimbabwe overview
Nampak Zimbabwe overview 73 › Restructured in October 2014,publically listed on Zimbabwe Stock Exchange (ZSE) › Comprises 3 operating companies › CMB Zimbabwe – metals, crowns and plastics › Hunyani – corrugated, cartons and labels › Megapak – PET, Preforms, roto and blow moulding › Fully compliant
Slide 74: Rest of Africa growth key growth geographies
Rest of Africa growth key growth geographies Nigeria Ethiopia Kenya › Material greenfields projects and acquisitions (>$50m) Angola › Regional incremental growth projects › Acquisitions
Slide 75: Growth in beverage consumption supports Nampak's strategy
The growth in alcoholic and non-alcoholic beverage consumption supports Nampak’s strategy 75 NIGERIA ANGOLA ETHIOPIA › 1 in 5 households is middle class › 1 in 3 households is middle class › 99% households are low income, › Middle class: 30% (2020) & ~40% (2030) › Middle class: 50% (2030) earn <$2/d
Slide 76: Current SSA glass market as big as South Africa's market
Current SSA glass market as big as South Africa’s market 76 Food/ Wine Pharma Rest of Sub (1%) (4%) Sahara, (5%) Spirits Zimbabwe (3%) (5%) Mozambique (4%) Tanzania, Carbonated (3%) soft drinks (12%) Nigeria (36%) Zambia (9%) Flavoured alcoholic beverages Cameroon (11%) (1%) Beer (67%) Ghana ( 4%) K
Slide 77: Glass opportunities
Glass opportunities 77 Nigeria greenfield opportunity Ethiopia greenfield opportunity › MoU is being finalised with a › MoU signed with an investment partner local partner › Total estimated investment: › Land has been identified in Agbara, ~$65 – 70m close to Nampak Bevcan › Nampak direct investment
Slide 78: Conclusion
Conclusion 78 › 2015 was a challenging year › Fundamental investment hypothesis remains unchanged › Key projects on track for 2015/2016 › Project pipeline attractive › Demographics remain compelling for target market › We are being judicious with investments and managing risks appropriately
Slide 79: Thank you
Thank you
Slide 80: Investor Day – Glenn Fullerton, CFO
2015 Investor Day Glenn Fullerton Nampak CFO 17 September 2015
Slide 81: Forward looking statements
We may make statements that are not historical facts and relate Forward looking to analyses and other information based on forecasts of future 81 statements results and estimates of amounts not yet determinable. These are forward-looking statements as defined in the U.S. Private Securities Litigatio
Slide 82: Key external trends impacting our business
Key external trends impacting our business 82 › Challenging macroeconomic dynamics in RSA and some African countries › General economic activity in key markets under pressure › Currency devaluation in key markets resulting in imported inflation › Above inflation wage and energy increases in South Af
Slide 83: Initial insights
Initial insights 83 › Implementation of portfolio › Capex spend in SA and Rest of management strategy has resulted Africa (RoA) markets expected to in a focused and simplified group yield benefits in 2016 › Significant attention placed on › Exciting growth prospects in RoA to corporate finance activ
Slide 84: Initial insights
Initial insights 84 › Expansion of geographical footprint achieved from internal reallocation of funds and long term debt » dollar denominated funding utilised » evaluated against internal hurdle rates » no call was made on shareholders for additional funds and there was no change to existing divide
Slide 85: Key financial trends: Acquisitions and disposals
Key financial trends Acquisitions and disposals 85 Net cash position from acquisitions and disposals 2011 to 2015 (R million) 5 000 Bevcan Nigeria 4 000 (Alucan) 3 000 Balance of paper and flexibles Paper segment disposal 2 000 Europe, Disaki, LCP, Glass Interpak JV Partner Cartons 1 000 and labels
Slide 86: Key financial trends: Capex
Key financial trends Capex 86 Capex spend 2011 to 2014 (R million) › Strong investment to ensure productive capacity 5 000 9 000 maintained and expanded › Key focus has been on 4 000 7 000 expansion with certain replacement capex 3 000 5 000 increasing capacity › Operational leverage now 2 000 3 000
Slide 87: Key financial trends: Funding – interest bearing debt
Key financial trends Funding – interest bearing debt 87 Interest bearing debt 2011 to 2014 (R million) 7 000 Bevcan Nigeria 6 000 5 000 4 000 Strong 3 000 interest cover 2 000 1 000 0 2011 2012 2013 2014
Slide 88: Key financial trends: Cash generation
Key financial trends Cash generation 88 Cash generated from operations from › History of strong internal cash 2011 to 2014 (R million) generation 3 500 › Assisted in funding capex programme and other expansion activities 3 000 › Expect 2016 to deliver strong cash 2 500 flows with stabilised operatin
Slide 89: Key financial trends: Dividends paid
Key financial trends Dividends paid 89 R million › Group’s cash generative capacity has strongly assisted funding of 1 000 African growth as well as capex 900 investment plan 800 › Allowed dividend policy to 700 be maintained 600 › Strong historic dividend 500 400 300 200 100 0 2011 2012 2013 2014 D
Slide 90: Key focus areas
Key focus areas Nampak 90 Capex Working capital Forecasting management management Leveraging Asset economies () performance of scale assessment Balance sheet optimisation Managing RoA liquidity issues )
Slide 91: Near term CFO priorities
Near term CFO priorities 91 Finance to play a proactive role in the “buy, make and sell better” strategy
Slide 92: Conclusion
Conclusion 92 › Group restructure completed utilising mix of internal funds and dollar loans › Implementation of strategic plan has resulted in focused group positioned for growth › Operating and productive capacity enhanced by capex programme › Exciting growth opportunities combined with improvemen
Slide 93: Thank you
Thank you