Over the past two years, Nampak has been engaged in a restructuring and reorganisation process, resulting in the sale of low margin businesses, a capital expansion programme, investments in energy efficiency, improved focus on operational excellence, cost reductions and improvements in procurement processes. This process, which is still underway, has left Nampak in a stronger position to navigate challenging economic conditions in key markets.

METALS
Bevcan demand is mainly driven by pack–share dynamics, demand for carbonated soft drinks and alcoholic beverages and marketing and supply decisions by customers. Bevcan South Africa's volumes have softened in the second quarter after the first quarter peak season. Nonetheless, full year volume growth is still expected to exceed GDP growth. Strides have been made in addressing the spoilage at Bevcan Springs and this remains a key focus area for the division. Recently signed long term sales agreements with major customers, a well-established cost-competitive manufacturing footprint and a strong market position puts the division in the best possible position to maintain market share and leverage opportunities. The Angolan overall market has been adversely impacted by the slowdown in economic activity resulting from lower crude oil prices. However, the recently finalised supply agreement with Refriango will boost volumes. The Nigerian market is still growing and Bevcan Nigeria’s market share is expanding as customer volume allocations increase. This operation’s utilisation was at an annualised output rate of 600 – 700 million cans per annum. Negotiations are progressing with key customers in both Angola and Nigeria to provide assistance to Nampak with the import of major raw material items and components.

In South Africa, Divfood is on track for an improved performance year-on-year. Import replacement contributed to a steady growth in polish and fish can volumes; fruit can volumes were up on the back of market share gain and tinplate aerosol volumes were strong due to stronger insecticide demand. The division’s improved volume performance was moderated by some unit margin decline from new sales volumes. Business and operations improvement initiatives, including manufacturing consolidation, complexity reduction and replacement of ageing equipment with energy efficient and technologically advanced machinery are progressing well and ongoing benefits, in particular further cash fixed cost reduction, will materialise in the second half. These should contribute to an improved performance for the year.
The performance of the general metal packaging businesses in the rest of Africa remained steady, influenced by agricultural sector yields and country specific macro-economic issues.

PLASTICS
The Plastics cluster benefited from continued incremental improvement in cost savings, product diversification and operational improvements in South Africa and the UK. Margins in the UK were somewhat lower as the result of a programme to regain market share. The South African business showed improved performance due to higher demand for juice and water driven by higher temperatures during the summer season and contribution from new sales to the lubrication oil market. Drum demand was subdued due to lower alcohol exports and the crate business continued its recovery from the previous year’s performance. The Zimbabwean business also performed well due to continued growth in fruit juice and Mahewu bottle demand.

PAPER
Nigeria Cartons performed well as a result of increased sales volumes. Good growth in the demand for general fast moving consumer goods (FMCG, [Status]) packaging contributed to performance. This trend is expected to continue in the short term as restrictions on imported products encourage local sourcing of packaged goods. Cigarette carton volumes improved and are expected to remain reasonably strong for the remainder of the year. In Zambia, sorghum beer carton sales volumes were down due to poor demand. Kenya Bullpak’s performance was in line with the previous year on account of flat demand for self-opening bags in the milling industry. Malawi was ahead of the prior year’s performance mainly due to increased overall sales volumes in liquid packaging sorghum beer cartons. Currency devaluation, however, negatively impacted operating profit. In Zimbabwe, Hunyani performed well, driven by improved market share in the tobacco market, the implementation of cost containment initiatives and the imposition of duties on the importation of various packaging formats which has increased demand for locally manufactured packaging.

GLASS
The glass division remained resilient, although after a strong first quarter through to December; demand in the beverage sector has softened. Following a challenging 2015 financial year, all technical and operational issues are fundamentally resolved. The factory has stabilised, production output has ramped up and the pack to melt (PTM, [Status]) ratio has reached predicted levels. The operation has returned to profitability and the improved performance is expected to continue going forward. The division is on target to deliver a 2016 financial year trading profit in line with previous guidance. This guidance is based on contracted customer offtake volumes, while actual sales will be influenced by the general beverage market demand going forward. Overall annual volumes are expected to benefit from improved sales into the wine industry.

REST OF AFRICA CURRENCY AND LIQUIDITY
In the rest of Africa, overall Nampak sales volumes continue to perform well and the businesses are profitable. Trading margins remain attractive even after adjusting for forex impact. The majority of monthly pricing is based on the previous month’s average USD (US dollar, [Status])/local currency exchange rate which protects trading margins. While liquidity issues and currency risks remain in Nigeria and Angola, management is focused on proactive management of the issue to ensure the risks are mitigated where possible. Liquidity in Nigeria has been relatively consistent during the period albeit below the respective Nigerian operations requirements. Liquidity in Angola remains disappointing and is being closely monitored. Where possible, inventory levels are being managed and appropriate hedging instruments are being considered to mitigate the foreign exchange risks.

Raw material supply to operations is secured through the group’s offshore buying and treasury office on the Isle of Man that ensures continuity of supply to the respective operations. The strategic advantage of the offshore structure has been invaluable in times where a lack of USD liquidity in Nigeria and Angola has placed pressure on other manufacturers’ cash flows.

In the previous financial year, on average Nigeria and Angola purchased USD12 million dollars per month of raw materials through the offshore operation and approximately USD6 million per month was obtained from in-country commercial banks. For the current financial year-to-date, inventory levels have been carefully managed together with capital purchases, reducing purchases to an average of USD8.5 million per month with the average net funding requirement of USD 3.5 million per month.

Due to the varying structures of the economies and dependence on oil as a source of revenue, liquidity in Nigeria was significantly stronger than in Angola. For the year ended 30 September 2015, the group achieved liquidity of approximately 58% of the value of invoices for goods and services supplied. During the period from 1 October 2015 to 29 February 2016 liquidity of approximately 60% was achieved based on invoices presented to in-country commercial banks for payment. During this period the Angolan kwanza depreciated by 15% against the USD.

As at 30 September 2015 Nampak cash balances in Nigeria and Angola amounted to approximately R700 million and as at 29 February 2016, this balance had increased to approximately R1.5 billion. R100 million of the increase relates to the translation of the balances to ZAR (South African rand, [Status]) at a weaker ZAR/USD exchange rate. The balance represents a combination of profit generated in the period and the liquidity shortfall. These monetary items are required to be translated to the ZAR at the ruling month end official exchange rate and the foreign exchange gains/losses booked through the income statement.

All foreign currency translations and foreign currency transactions are translated using the official exchange rate in line with the requirements of International Financial Reporting Standards and foreign exchange regulations in individual countries.

DEBT AND COVENANTS
In the absence of a sudden and major depreciation in the ZAR/USD exchange rate, Nampak is expected to remain within its covenants. Efforts to optimise the balance sheet, a key focus area for Nampak, are underway. A R2 billion Note Programme was established on 1 March 2016. The programme enables Nampak to issue unlisted Notes up to a value of R2 billion to raise financing for general corporate purposes, enhances the group’s borrowing and liquidity position and allows the notes to be structured to bolster the group’s long term funding profile and improve short term liquidity. An update on alternatives to further strengthen the balance sheet will be given in due course.

SPECIAL PROJECTS UPDATE
•Buy Better program
This project, focused on streamlining and improving procurement processes, is underway and on target to deliver savings of around R120 million in 2016.
•Sale of non-core assets
In line with the strategic objective of active portfolio management, Nampak is evaluating the possible sale of non-core assets within its portfolio. Proceeds from the projects are earmarked to retire debt.


DIVIDEND
In keeping with past practice, the board will consider the Group’s dividend policy having regard to the prevailing economic conditions, African liquidity constraints, group cash flow requirements and the outlook for the Group going forward.

BLACK MANAGEMENT TRUST SHARES
The ten year funding provided to the Nampak Black Management Trust (“BMT”, [Status]) matured on 31 December 2015. As a result, the BMT was required to sell sufficient shares to pay to Nampak an amount equal to the founding grant plus a notional return. A total number of 20 598 233 Nampak shares were sold on the open market to settle Nampak, with 2 114 919 sold on behalf of participants. The shares were sold between 14 January and 18 February 2016. This resulted in an inflow of R 386 million to the Nampak group which was used to reduce group interest bearing debt.

REST OF AFRICA GROWTH PROJECTS
In view of current economic conditions, Nampak will be circumspect regarding further capital investment in the rest of Africa. As communicated in December 2015, Nampak has taken a decision to delay the investment into a third beverage can line and glass furnace in Angola and is carefully evaluating further capital projects in the region. The glass opportunities in Nigeria and Ethiopia are of significant future value to Nampak and they continue to be evaluated and considered with prudence.

CAPITAL EXPENDITURE
Focused management attention on rationalisation of 2016 capital expenditure (including replacement and expansion projects, [Status]) showed results with guidance for the year revised down to R0.8 - R1.1 billion from the R1.2 - R1.6 billion, previously guided.

EXPECTATIONS FOR THE REST OF THE YEAR
It is expected that continued volume growth in beverage cans, gains from improved performance at Glass and improved efficiencies from business improvement initiatives at DivFood will contribute positively to earnings. Glass has turned around and is expected to deliver profits in line with the previously communicated guidance. The group’s operations in the rest of Africa are expected to continue generating growth in revenue and profit supported by expected growth in demand. Liquidity issues in Nigeria and Angola, a key focus area for management, are expected to have foreign currency translation impacts. Significant progress is expected on efforts being considered to strengthen the balance sheet. In the absence of a catalyst to promote economic growth in our key markets, demand for packaged goods and exchange rates are expected to remain a key factor influencing our results.
Shareholders are advised that the financial information contained in this announcement has not been audited, reviewed or reported upon by Nampak’s external auditors.

Sandton
16 March 2016

Sponsor: UBS South Africa (Pty, [Status]) Ltd

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