Nampak to invest R4 billion in new glass furnaces in SA and rest of Africa
Listed packaging company Nampak may invest as much as R4bn over the next five or six years in new glass furnaces in SA and elsewhere in Africa where it does not already supply glass.
"We have identified glass as one of the core businesses going forward," Nampak CEO Andrew Marshall said yesterday.
The company announced yesterday that it had agreed to pay R938m to Bayerische Flaschen-Glashuttenwerke Wiegand & Sohne, a private German glass-making business, for the 50% stake in Nampak Wiegand-Glas it does not already own, to grow its business.
Nampak supplied materials such as paper, plastics and metals for packaging in 12 countries in Africa apart from SA, but did not offer glass to its customers outside of its domestic market, Mr Marshall said.
"Glass is one of the core businesses we want to grow in Africa," he said. Glass manufacturing had high barriers to entry because it was "capital intensive and requires a lot of technology".
Nampak has two glass furnaces in SA, each with an annual capacity of 1000000 tons, and a third was planned, he said. A furnace takes about 18 months to build and costs about R1bn.
Feasibility studies were being evaluated on where Nampak would start with its plans to take on its competitors in its three largest markets -- Angola, Nigeria and Kenya -- he said.
A decision to invest in furnaces outside SA would be taken in the "short to medium term", Mr Marshall said. Disclosing the timing and location of the company’s investments might compromise its competitive advantage in its target markets.
Given the size of the market and growth opportunities in West Africa, Nigeria would be the most likely candidate for the first of its furnaces outside SA, he said.
Building four new furnaces over the next six years would require a back-to-back build programme. Mr Marshall said this would be "a tall ask". It "would be possible, but I don’t think we would be that aggressive".
Spending R4bn over the next five to six years was "manageable" for Nampak, Mark Hodgson, an analyst at Avior Research, said yesterday. Nampak would fund the factories through a combination of its cash resources and borrowings. "They have the ability to gear up again," Mr Hodgson said, commenting on the company’s ability to carry more debt.
Mr Marshall said: "If you go back three to four years, we had about R4bn of debt and we were not able to invest. We have paid a lot of that down and we are now in a financial position to invest again in growth."
Mr Hodgson said the Nampak Wiegand-Glas transaction fitted in with the firm’s growth aspirations to service the growing beverages market in SA, and the acquisition made financing the growth of Nampak’s glass business "cleaner".
This article was originally posted on Sustainable Development Africa Platform
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