Wine gives Nampak a boost
Packaging company Nampak expects to double the number of wine bottles it manufactures for clients such, as KWV and Nederburg, this year.
The firm expects wine exports to flourish, thanks to a trade pact between SA and the European Union (EU), along with the weak rand making the country’s chenin blanc and pinotage wines more appealing to foreigners.
At present, about 20,000 bottles are produced from the company’s Germiston glass factory in Ekurhuleni municipality.
"We expect this to increase to 40,000 bottles this year," Nampak Glass MD Pieter van den Berg told reporters on a site visit last week.
South African exports have benefited significantly from the Economic Partnership Agreement, which came into effect in 2014 and allows for greater access of agricultural goods from the Southern African Development Community (Sadc) into the EU.
Among other things, the trade pact, which replaced the Trade Development and Co-operation Agreement, allows for about 110-million litres of wine to be exported duty-free from the Sadc region to the EU area.
SA accounts for the largest share of Sadc’s trade with Europe.
"We are grateful for the intervention from government to boost bottled wine exports," Nampak CEO Andre de Ruyter says.
"This creates an opportunity for us to grow our business," he says, adding that the rand’s 40% pounding against the dollar and its 37% slump against the euro will further boost such growth.
Nampak’s glass division receives the bulk of its revenue from bottling spirits, food and soft drinks for clients including Diageo, Tiger Brands and Amalgamated Beverage Industries. But "wine is a high-margin business", says Rob Morris, Nampak’s group executive for glass in SA and the rest of Africa.
The drought and the recent fires in the Western Cape, the main wine-growing area in SA, have not resulted in a drop in client orders, says Mr Morris.
"With fewer grapes, the concentrate that you can squeeze out of them is greater, which means there is actually more to bottle."
Nampak packages a third of all glass bottle products in SA.
Larger rival Consol, which may list on the JSE next year once private equity firm Brait exits its investment in the bottling company, dominates the market with about 78%.
Last year, Nampak Glass recorded an operational loss of R27m and incurred additional finance costs of R71m, due to challenges in getting a third furnace up and going. These have since been rectified, Mr Ruyter says.
The investment made in the third glass furnace was R1.2bn.
Since the appointment of Mr van den Berg as MD of the division, the factory has not only improved injury rates, a key element for productivity, says Mr de Ruyter, but efficiencies too.