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Edited Transcript of NPK.J earnings conference call or presentation 27-Nov-19 6:00am GMT

Full Year 2019 Nampak Ltd Earnings Presentation

Johannesburg Dec 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Nampak Ltd earnings conference call or presentation Wednesday, November 27, 2019 at 6:00:00am GMT

TEXT version of Transcript


Corporate Participants


* André Marinus de Ruyter

Nampak Limited - CEO & Executive Director

* Glenn R. Fullerton

Nampak Limited - CFO & Executive Director


Conference Call Participants


* Kgosietsile S Rahube

Citigroup Inc, Research Division - VP




André Marinus de Ruyter, Nampak Limited - CEO & Executive Director [1]


All right. Okay. Ladies and gentlemen, if we can start settling down, please, so that we can start. We've got people joining us on a webcast. Let's try and respect punctuality. So if we can just settle down, appreciate it. Thank you.

Let's, first of all, as is customary, start with a safety moment. There are no fire drills or evacuation procedure scheduled for this morning. In the event of an alarm, it will, in fact, be real, so please proceed through the door behind you to your left and to your left again, and the assembly area is in the quadrangle that you came through as you entered.

Another point of order, which is, of course, very important, is that the facilities are not across the hall. That's occupied by Sasol at the moment. So just proceed alongside this wall and at the first entrance, turn to your left, and the ladies and gents are located there should you need it.

Thirdly, the presentation this morning is about Nampak. It's not about Eskom, so unfortunately, I will not be entertaining any questions or comments on Eskom. Right. With that out of the way, welcome. It's good to see all of you again, and thanks very much for being here this morning. We're delighted that you could join us for our annual results presentation for 2019.

So let's start with a bit of strategy, and I thought that it would be appropriate to remind ourselves about the origins of the Nampak Africa investment strategy. So in 2010, McKinsey wrote a seminal report entitled Lions on the move or the Lions of Africa and followed very soon by a number of other reports including The Economist, that very firmly established this notion of Africa rising, 900 million consumers in Sub-Saharan Africa on the verge of becoming a major new emerging market for fast-moving consumer goods.

At the time, Nampak had gearing, and the bankers in the room will be delighted to reminisce about this, of ZAR 12 million. That was the net debt that Nampak had, and that's a million, not a billion. So the company was effectively ungeared. And at the time, management decided that it was a very good opportunity to enter these emerging markets and take advantage of this opportunity, spent some ZAR 11 billion on CapEx, spent a net ZAR 2 billion on corporate finance activities through various acquisitions and also divestitures and paid out in excess of ZAR 4 billion in dividends. What was not fully anticipated at the time obviously was the emergence of the commodity crisis, which caused a precipitous drop in the oil price from about $110 a barrel down to as low as $27 a barrel. And I can tell you that no one anticipated it, certainly not my former company who's presenting across the hall from us this morning. So that caused us significant liquidity issues in Angola, also in Nigeria, and it reminded all of us that with these high-risk opportunities, obviously, you also have the risk that the macro might turn against you.

But if you stand back for a minute and think about what Nampak would have looked like without the Africa strategy, 70%, as you will see in the results that Glenn will be presenting a bit later on, 70% of our trading income is now derived from our African operations compared to 41% from SA. Now you'll immediately say that doesn't add up, it's more than 100%, and that's because there's a negative 11% that's got to be deducted from that for corporate charges. But clearly, from a profitability perspective, the rest of Africa has delivered in spades. And if you look at the growth that we've demonstrated in Nigeria Bevcan, if you look at the very good prospects that we are confident will materialize going forward in Angola, that market is turning around, it's looking very positive, thanks to some very innovative marketing initiatives that we've launched. We believe that the African rising narrative has been postponed, it has definitely not been canceled, and we remain optimistic about our investment case.

And why are we optimistic? We remain the packaging leader in Africa. We occupy strong positions. We're the market leader still in beverage cans in SA. In spite of 2 new entrants, we were able to maintain our market share north of 80%. So I know that some of the sell side had particularly catastrophic forecasts about the impact of new entrants. And I think it's fair to say that we were able to head those off through, on the one hand, being far more focused on costs and efficiencies but, on the other hand, also competing aggressively and actively, with the consequence that Bevcan SA managed to report trading profit for the year that was essentially flat compared to the prior year in spite of 2 new entrants.

We've got 5 lines installed in South Africa. Our competitors only have 1 each. And as I've explained before, that gives us a unique competitive advantage in terms of saving time on changeovers and improving our efficiencies.

After the initial honeymoon period, where our customers were very excited about the prospect of having a new supply, in fact, 2 new suppliers at their disposal, I think it's fair to say that they've recognized the Nampak value proposition. And we've been able to regain quite a bit of the volume that we had initially lost in terms of contractual allocations to the new customers. So that's quite exciting, and it shows the value of these established relationships that we've built over many years.

We've invested, and we've invested well at an average exchange rate of about ZAR 7.70 to the U.S. dollar. So we recapitalized our beverage can business at a far more advantageous exchange rate. So you can clearly see that, that gives us a built-in competitive advantage in terms of return on capital employed.

And then we've got a widely diversified business, 24 locations in South Africa. We operate in 11 African countries, 18 manufacturing locations across the rest of Africa. We were able to report double-digit trading margins, which under the current conditions, I think, is a reasonably creditable performance. And we are the #1 manufacturer of beverage cans in Angola. And we were able to, in fact, depose our competitor in Nigeria from their #1 slot, and we are now #1. And I know it says here joint #1, but we've just got the post on that. So I think we've done quite well from a competitive perspective.

This is a slide that many of you may recall, where we try to illustrate various scenarios for anticipated market growth and how market growth would absorb the excess capacity introduced into the market by the 2 new entrants. You can see there that the closure of the Epping plant clearly reduced our installed capacity, so that immediately had an impact on the excess capacity available in the market. But what we are particularly pleased about is that the market -- the beverage can market in South Africa grew by 6% during the 2019 financial year. So that is way in excess of GDP certainly, and it is above the most optimistic assumption that we had used when we spoke about the rate at which the excess capacity would be absorbed. If this trend continues, and we are quite confident that it will because we are actively developing new market segments, then we are quite likely to be able to see an absorption of this excess capacity without it having an unduly negative impact on our business.

Sorry, I'm just seeing if the gentleman is okay. Good. No Heimlich maneuver required. So what do we want to do in terms of creating value for our shareholders? As I mentioned at the Investor Day, we've got 4 priorities in sequence. First of all, we intend to pay down debt and, in particular, U.S. dollar-denominated debt. That is a clear focus area. And as we receive the proceeds from the various divestitures, we will apply those proceeds to retiring debt and, in particular, U.S. dollar-denominated debt to significantly de-risk our balance sheet. That is our #1 priority. Should the opportunity present itself to return cash to shareholders by buying back shares, we will consider that. It's a very clean mathematical evaluation of an opportunity, so that is what we will do. We will keep an eye on those opportunities as and when we have cash available. Ultimately, we wish to resume paying a dividend. That is firmly on the cards. But I have to stress that the dividend policy is likely to be far less generous than the 65% payout ratio of headline earnings per share that was maintained in olden times because that simply is not a sustainable policy. And once we've done all of that, we intend to pursue high-return projects. High return means that it will exceed our hurdle rate, which is 1.5x our weighted average cost of capital. And we are confident that there are projects like that around, but for the moment, we are holding those in abeyance as we address the top 3 priorities.

Our ambition is still to be the best in Africa. I think we are the partner of choice for many of our customers. We're quite proud of the relationship that we've got. We are able to innovate, and I'll give you some proof points on that. We have a unique and very strong R&D capability, and that will enable us to deliver sustainable results by building trust and credibility.

So some of the highlights. We have been able to continue with our portfolio optimization. We have delivered the sale of Glass. That agreement was signed right before the end of the financial year. We have submitted our filings to the Competition Commission. It is now in their hands. In all likelihood, they will classify it as an intermediate merger, which means that they have a period of 60 days in which to assess the transaction. We are reasonably confident that it is a transaction that will pass muster from a regulatory point of view. And if all goes well, obviously subject to the Competition Commission, then the proceeds should be in our hands during the first calendar quarter of next year. So that's very positive, and that will be a significant boost to our balance sheet, the ZAR 1.4 billion of proceeds that we will receive from that transaction.

We've also sold the Cartons business in Nigeria, and that will raise around about ZAR 400 million. And again, that will be used to retire dollar-denominated debt.

I'm delighted to announce that we were able to achieve BEE Level 2 status. It's been a very, very rigorous project under the leadership of Glenn and his finance team. And we've done, I think, a particularly good job at unlocking value, and that will be of huge advantage to us when we compete against these new entrants because the playing field is now pretty much level as far as BEE scoring is concerned. I may also just mention that we achieved this BEE Level 2 status without the need for an expensive equity transaction. So there has been no dilution of shareholders during this improvement from Level 6 to Level 2, so we are quite happy with that achievement.

We were able to transfer ZAR 3.2 billion from Nigeria and Angola during the financial year. Nigeria is fully liquid now. We have no issues in repatriating cash from that country. Where we have cash, that is still in Angola. That is due to the fact that we have acquired bonds, and those bonds we will hold as long as we can to maturity. Alternatively, there is a very small discount of between 2% and 4% that you have to release in order to trade those bonds. So about 73% of the cash balances in Angola are still hedged from a bond perspective. And that hedge, over the period that it's been in effect, has saved shareholders from a possible ForEx loss of about ZAR 1.9 billion, so it's been an extraordinary successful hedge that we have put in place.

Our turnover was down 8%, and this is obviously from continuing operations. And as a consequence of that, we had a margin squeeze on trading profits, which were down 21%, but we were able to still, as I said, report double-digit trading margins. On a normalized basis, HEPS is down 9%, and Glenn will unpack what we mean by normalized. There have been some extraordinary events with regard to the devaluation of the currency in Zimbabwe, and that has had a negative impact on the income statement. Normalizing for that, HEPS is down 9%, and EPS is down 17%.

The portfolio optimization will continue. We will continue to scrutinize every part of our business and exit where we believe we do not have a sustainable competitive advantage or where we believe that we are unlikely to reach our targeted rates of return. And we are in the final process now to divest of our Plastics Europe business. For many years, analysts, shareholders have asked us what the strategic nature of this part of our portfolio is. We agree with them that this is not a long-term part of our portfolio, and we therefore launched an accelerated sales process. We have received offers from credible buyers, and we're in the process of finalizing those. And if we are successful, and we should have very good indications on the prospects of that before the end of this calendar year, if all goes well, so it's a really fast process that we've gone through, we will see a relief of ZAR 500 million in an unfunded pension liability that's currently sitting on the balance sheet. So they will be further resilience added to the balance sheet on the back of this transaction. We've also sold our IBC business. Now the IBCs are those big 1,000-liter plastic containers. We've sold that, a small transaction but very quickly executed, raised about ZAR 27 million for that. And then we're in the process of also selling our tubes business. Also from a strategic point of view, that business is not in a particularly favorable spot.

So when we think about our business, we try and focus on the levers that are within our control. And for the accountants in the room, you'll see that this is all towards the upper end of the income statement. So we don't want to try and manage the numbers by what happens lower down the income statement. Obviously, that needs to be optimized and well looked after. But if you don't have the top line and the top part of your income statement firmly under control and well managed, then no amount of optimization lower down could fix what happens at the top.

So we have launched initiatives, and I'll come to the proof points in my next slide, to manage our cash fixed costs quite aggressively, that is in place and has already delivered results; to improve our total gross margin, either by driving additional volume or by improving the unit margin of the products that we sell. And then there's a very strong focus on capital allocation both from a project execution and capital allocation to those projects in terms of meeting the required rates of return and de-risking those projects with a greater degree of probability of success. But also, from a working capital perspective, we are paying a lot of attention to making sure that we're able to get the earns and turns of the business up to the required speed.

So let's look at some of those proof points, as I mentioned. Bevcan, as I said, maintained an 80% market share. We were able to significantly improve our volumes in Bevcan Nigeria. And those of you who have been following the Nigerian consumer market will know that, that market has been under some strain. And the reason that we were able to grow our volumes by such an extent is that the pack share for beverage cans in Nigeria is hovering around about 2% to 3%, so it's really quite low, which gives us a significant headroom for growth going forward. That plant is now approaching full capacity utilization. And Erik and his team are already working on various opportunities to expand capacity in a low-CapEx, low-risk way in order to ensure that we take advantage of that market opportunity.

Our Cartons business. Many of you have taken advantage of the water in the carton that you saw outside. That has found a lot of favor with the Greta Thunberg generation. It is a strong favorite school tuck shops, where kids apparently love this so that they don't have to drink from a plastic bottle. So we are tapping into that trend, and it's really paying off for us, and we've seen good volume growth in that business.

We were able to secure a new contract for the Crates business. And as a consequence of that contract, which enables us to run that facility 24/7 for the next 3 years to supply a major beverage company, we have declassified that business as held for sale. And we are now operating flat out in our Olifantsfontein plant.

Operational efficiencies have continued to improve. We are focusing on spares and asset care, so we are not neglecting the underlying assets as we optimize. And we've been able to identify new and competitive suppliers to place our existing suppliers under a bit of competitive tension, and that has paid off in being able to procure at better pricing.

In terms of reducing cash fixed costs, we were able to contain salary increases this year to below inflation. We've seen quite dramatic headcount reductions in Bevcan Angola and Plastics South Africa as well as in East Africa. We have -- for example, since the start of the significant devaluation and the concomitant impact on volumes in Angola, we have seen a 20% reduction in headcount in that plant. And we will continue to manage our cost base actively and making sure that we're able to offset the impact of lower offtake in that market.

There are further opportunities to reduce overhead costs. Those have been identified, and we have a dedicated project manager who is tracking all of these activities and making sure that we have a very high probability of success of delivering further savings. We have commenced consultations with organized labor. They're aware of our plans, they've agreed to them, and it's now a matter of implementation. And of course, during 2020, we will therefore see further consolidation and restructuring affecting various parts of our operations in South Africa.

We have already delivered ZAR 412 million in savings during FY '19. That's banked. And it shows that we were able to maintain a very stringent focus on our cash fixed cost, and we will deliver a further ZAR 240 million over the next 18 months. So those programs are in place and well managed.

Capital allocation came down to ZAR 735 million. You'll remember that about 4, 5 years ago, CapEx was hitting about ZAR 2.2 billion per annum. And I think we found a new normal, and that is around the ZAR 700 million per annum mark. So significantly down in terms of CapEx, so we're making our assets working harder.

We were able to release about ZAR 200 million from various supply chain financing initiatives, so that's real cash in the bank that we were able to unlock. We've extended payment terms from our suppliers. So the same pressure that our customers put on us we've put on our suppliers, and that has been instrumental in enabling us to offset the pressure that we've experienced from our major customers. And we will deliver a further ZAR 140-odd million in those savings over the next 18 months. And as I mentioned, we will continue to rationalize the portfolio.

So BEE Level 2, done. It's in place. Delighted with that achievement. We're really very proud of that. And we are increasingly more in tune with the environmental pressures faced by the packaging industry. And we participate in ensuring that our impact on the environment is well managed and that we participate as a responsible corporate citizen in various recycling initiatives.

We have expanded the market for rPET. That is PET that has been recycled and collected and recycled. So it's a great molecule actually if you think of it. It can be infinitely reused. And we are working quite hard. So these water bottles that you see typically have a 50% recycled content already. So plastic isn't quite as evil as it's made out to be but, nonetheless, more work to be done on reducing the environmental impact of plastic. And then we were able to employ in excess of 200 young people in South Africa by participating in the YES4Youth program.

As I mentioned, Nigeria Carton sale completed, ZAR 440 million. That is in the final process with the Nigerian competition authorities. Glass is sold. And we sold intermediate bulk containers. And we will be making further announcements on Plastics Europe, which, hopefully, will be in the very near future if things go as anticipated, and then also our Tubes business to drive profitability.

So just quickly taking you through this. This is a slide that you have seen before but just updating it. So the transaction was, in fact, concluded, and we have now submitted our merger approval findings, and we expect the decision by March of 2020. So all systems go. All the lights are green. And thanks to Rob Morris and his team for keeping the home fires burning during some very challenging times over the past financial year. Ironically, I guess, in total, the Glass business suffered electricity interruptions totaling 11.8 days during the year, which, of course, created havoc with operational efficiencies.

The same with Nigeria Cartons. So it's a trend that we see internationally that our customers increasingly use global procurement, and global procurement drives a consolidation of supplier bases. And following from that, they want to deal with fewer and fewer global suppliers. This cartons plant was one of a kind in the Nampak portfolio. We sold that to one of BAT's major global suppliers, which is A&R Carton of Germany. And they will be taking over that operation as soon as the Nigerian competition authorities pronounce their approval. We don't expect any issues or difficulties in that process.

So the growth opportunities. We are actively working to develop new market segments. We are thinking very hard what else we can put in the packaging that we manufacture. And the consequences should be quite visible to you. We've got water in cartons. We've got flavored water in cartons also in cans. There's a rock festival in the Western Cape called Rocking the Daisies, and water in cans were particularly well received by some very thirsty students, I guess, the morning after. We're also putting craft beer in cans as well as wine. And we are working with a young entrepreneur who goes around with a mobile can-filling plant. And he goes to all the vineyards, and he fills up wine in cans. And at the moment, we have 2 wines, Erik, already on shelf, but there are further 40 wines on pack test at our R&D facility so expect wine in cans to become a very significant part of your picnic basket going forward.

We're also going to look at export opportunities. You may recall that we have terminated the technical support agreement with Crown. Not only has there been a significant cost saving as a consequence of that, but we also have now been unshackled from the restrictions that were attained through that agreement. And as a consequence, we're now able to export into African countries that we were hitherto precluded from, and that will enable us to look at exporting cans into Francophone Africa. And we've already sent some of our initial scouting expeditions out there to see what the opportunities are, and we're quite excited that those are markets that we can tap into using our operations that we already have in place.

So with that, thank you very much. I'm going to hand over to Glenn Fullerton, our Chief Financial Officer, who will take you through the financial and operational overview. Thank you, Glenn.


Glenn R. Fullerton, Nampak Limited - CFO & Executive Director [2]


Good morning, everybody. Thank you for joining us. I'm going to get into the finances and operations section of the presentation. There are some rather complicated accounting treatments that we've had to deal with in this year-end, and I hope to be able to unpack that for you so that you can detail with a far better insight into the numbers.

Just in terms of the results summary. Group turnover is down by 8% to ZAR 14.6 billion. And I think that's been materially impacted by lower demand in Angola and the hyperinflationary impacts in Zimbabwe. And I'll try and explain those effects to you as we go through.

Trading profits down 21% to ZAR 1.6 billion. There's been softer demand in Angola. And I think what's happened there is there's been a devaluation of the currency, and wage inflation hasn't caught up yet to actually stimulate the demand. We've seen that trend happen previously with the currency devalued in Nigeria. Once the wage inflation came back in line with the new pricing, demand came back to the market very strongly. So hopefully, that's a temporary issue. And there has been a decline in the trading margins. And then one of the significant numbers within our figures this year is the net foreign exchange loss in Zimbabwe and the hyperinflationary effect of trading in that market.

The positives is that we've managed to extract ZAR 3.2 billion from Angola and Nigeria, and I think the teams have done particularly well for a number of years now. It has happened consistently for the last 3, 4, 5 years of us being able to get cash out of those markets, so I think it bodes well for a long-term future in those markets.

Zimbabwe has been difficult, and we'll unpack the cash extraction from there. But if you take the big markets of Nigeria and Angola, we've had a cash extraction rate, which is measured as the cash that we've got out of the country versus the opening balance of cash, at 123%. So we basically got more cash out than we had in the opening balance.

Operating profit is down 84% to ZAR 254 million, and that's really as a consequence of this foreign exchange impact in Zimbabwe, the net effect of which is ZAR 1 billion. On a positive note, we've generated ZAR 1.1 billion cash before financing activities, up from ZAR 324 million in the prior year.

There are a few metrics on this slide, but I think it's important for us to try and give you a perspective of what a normalized position does look like. The Johannesburg Stock Exchange doesn't particularly like too many metrics, but I think to try and understand these numbers, it's important. And I'll unpack how we've got to the normalized position for earnings per share and headline earnings per share in a detailed slide later. But in summary, the earnings per share for normalized positions is down 17%; and from a headline earnings per share, down 9%. If you look at it from continuing operations on a pure accounting basis, it's far more severe than that, down 76% to ZAR 0.422. And from a headline earnings per share perspective, it's down 69% to ZAR 0.541.

When we bring in the discontinued operations, where we've had to make certain provisions for discontinued operations, we've actually ended up in a loss per share on both the headline and the normal earnings per share. And I think that probably takes into account some once-off adjustments that hopefully won't impact the numbers going forward.

If we have a look at the substrates and then the major segments within our business, focusing on the Metals, Rigids and Paper businesses. These are from a continuing operations perspective, bearing in mind that Glass is classified as a discontinued operation. Revenue in the Metals segment, at ZAR 10.6 billion, has been down 4%, and that's primarily because of the Angolan position. Trading profit of ZAR 1.4 billion is down 21%, with material impacts there being a tough trading condition in Divfood and the lack of demand in the Angolan market. The revenue in the Rigids segment is just under ZAR 3 billion, it's down 13%, and that's quite materially impacted by the hyperinflationary impacts within the Zimbabwe environment. The trading profit of ZAR 209 million is up 6%, so there's been some very good management of the costs in those businesses. Paper revenue of ZAR 1.1 billion, down 29%; and the trading profit following suit, down at 30% -- down 30% at ZAR 160 million.

If we have a look at the income statement. The revenue number, the dollar-denominated portion of that revenue, due to a weakening of the rand-dollar exchange rate, got an uplift of around 9%. So then if you look at the average exchange rate for the period, the rand-dollar exchange rate was 9% weaker. So that should have elevated the numbers from a dollar-denominated perspective, but that's been offset by the hyperinflation impacts in Zimbabwe.

Now if I can try and explain to you how complicated this is and yet probably still just relatively simple, in a normal foreign operation, we will translate the earnings of the foreign subsidiary at the average rate for the year except in a hyperinflation environment. So you would translate the earnings at average, the balance sheet at the spot rate, and the difference would be added to the foreign currency translation reserve. The accounting standards say except for in a hyperinflation environment, where you have to translate the income statement at the year-end spot rate. So what that's doing is translating the profitability to the latest exchange rate for what the money is worth today. And that's had a significant impact on the contributions from Zimbabwe, literally halving those profit contributions overnight as a consequence of that accounting principle. So that's had quite a material impact on the revenue coupled with the Angolan weaker demand. From a trading profit perspective, down 21%, and that's a compound effect of Angola and Zimbabwe. There's been a lower net abnormal items where that's 32% lower than the prior year. And in the big box that I think everybody needs to try and focus on is the net impact of us being in Zimbabwe. Ultimately, this has affected us by ZAR 1 billion. Now please remember that Nampak at a headline earnings per share level is only affected by [51.43%] to this number and after tax. The tax rate is [25.75%] in Zimbabwe. So whilst it's the bruising blow for the wrap in the income statement, when you translate it down into a HEPS perspective, it probably equates to around about ZAR 0.15, the contribution from the trading profit levels of Zimbabwe.

What we've had to do is that there was a dollar functional currency at the beginning of the year. When the currency was changed to the RTGS dollar, it became the functional currency. So any dollar-denominated liabilities in the Zimbabwe accounts have had to be translated to the new exchange rate, which was originally pegged at 2.5 to the dollar. And as you're aware, that's gone almost up to parity with the rand-dollar at the end of the year with the rand exchange rate to the Zim dollar has been, virtually, it's at 0.99 at the end of the year. So what's happened is those dollar-denominated liabilities of around $67 million have had to be devalued in the books of Zimbabwe and then hyperinflated. So the effect of that is a debit through earnings of ZAR 1.9 billion. Now we've had many debates as to how you treat this particular item. The accounting standard is quite brutal that says to the extent that these originated from trade receivables were not classified as a subsequent loan and that you have a repayment plan attached to this, you cannot classify that funding into that operation as part of your net investment in the foreign operation. If you could have, that movement that you see in this income statement would have gone through your other comprehensive income and not impacted your earnings per share. But the accounting statement says that because we've basically got a plan now and management has gone to the Reserve Bank of Zimbabwe, we've got a plan that they will repay us the $67 million over a period of 5 years with a 2-year payment holiday, the first payment of $5.6 million being due on the 31st of March, it precludes you from classifying it as part of the net investment. So we've taken our medicine this year, taken this exchange loss through the income statement. The ZAR 832 million is the net effect of translating the income statement items to the latest spot rate as opposed to the average. And then you've got to go and have a look at the balance sheet and look at the monetary items because they're in today's money. The nonmonetary items like the fixed assets and those kind of things have to be translated at the new spot rate. So you effectively get a gain out of that and the loss in the income statement, the net effect of which is this ZAR 832 million. So if you look at the impact of that foreign exchange loss of ZAR 1.9 billion, maybe you can sort of offset the ZAR 832 million against that. Then the net present value of the hedge that we've secured with the government is the ZAR 790-odd million.

We have then taken a very conservative view, and there are multiple opinions that you can get from this. (inaudible) talks about an expected credit loss ratio of around 12,29%. Moody's has put out a number of around 37%. We've sat back and said, if you look at the World Bank reports, if you look at the International Monetary Fund reports, the International Monetary Fund has put in what they call a Staff-Monitored Program into Zimbabwe, where they basically are requiring Zimbabwe to follow a whole lot of steps to get themselves out of the problems that they're in. And they have attributed a 15% probability to them being successful.

So we've applied essentially an expected credit loss ratio of 85% to that number. And when you apply the slight hyperinflationary effect, then it translates into a 90% charge in the income statement. So the net effect in the income statement from that hedge that we've recognized this year is only 76%. If we had taken a far more conservative view, the net effect would have been much higher, but then the income statement going forward would have been subject to further slippages in that expected credit loss. Because to the extent that any other party in that economy does not get paid, we would have to take a further expected credit loss on that number.

So the operating profit clearly is down 84% to ZAR 254 million. The net finance costs have been pretty well managed, but they have been impacted by a change in law in Angola, where all imports into Angola have to be backed by cash. So they cash-backed letters of credit. So you don't earn the interest on the money, but you cannot get new product into the country unless you have a cash-backed LC. So the net finance -- well, the finance costs are down, but the net finance income has been reduced the resulting position, where there's a 10% increase in the overall costs.

The tax expense, I'll unpack for you later. I have seldom worked in any environment where the tax expense is greater than the profit. But I'll try and explain it to you in the tax rate reconciliation, and it basically comes down to a change in law in Angola in the second half, where they basically said that any foreign exchange losses that you have incurred on dollar-denominated positions will be kept at a deduction of 7%. So effectively, where we had a deferred tax asset in previous years, we've had to reverse that deferred tax asset because the government had just simply disallowed that position and which has resulted in a debit in the income statement.

So a loss for the year. Earnings per share, down 76% to ZAR 0.422, and then the headline earnings per share are down 69% to ZAR 0.541.

This slide really tries to demonstrate to you what the position would have been had there not been this particular devaluation in the Zimbabwe position. And really, the first column is the first income statement that I presented to you. And then what we've done is just taken out the intergroup positions on the $67 million. The remaining $110 million on that particular line that you can see over there is the dollar external devaluations. So if you have a look through this slide, operating profit on a normalized basis would have been up 28% and the profit before tax up 30%. So there has been a significant impact on these figures as a consequence of this. And at the bottom right-hand corner, you can see there's a far lower reduction in the earnings per share and headline earnings per share at 17% and 9%, respectively.

Just to try and put together some kind of cryptic notes for those who have not had the joy of understanding hyperinflation. The last time I did this was in 1992, so I had to get up to speed. Basically, IAS 29 requires the income statement to be translated at the spot rate, not the average rate, which is a material implication, and the nonmonetary items to be done at spot. We've done this backdated to the effective date of the 1st of October 2018, and there has been a net effect of all those adjustments, as I've indicated, of ZAR 832 million.

The $67 million that Zimbabwe owes our Nampak International business, which is the treasury business, has arisen historically from goods and services that have been provided by that business into Zimbabwe over all those years. And that translated at the new exchange rate and hyperinflated gets you to ZAR 1.9 billion. Then I've spoken about the hedge that we've put in place. And essentially, in today's numbers, that number is a material hedge. And I think we've done well as a management team to get that in place. But I think it would be probably remiss not to be a little bit cautious about taking that through the income statement at this stage, and we've been conservative in providing that 85% hedge of it. So the net effect of all those accounting implications is a net charge to the earnings before tax and minorities of ZAR 1 billion.

The tax rate is a pretty complicated position. Clearly, the reporting tax rate in South Africa is 28%. We've tried to break this down into some kind of table that people can half get their heads around. We get certain government incentives. We have had a reasonable shield of 13.9% from the foreign tax rate differentials that we enjoy. We've had a relief in one of the jurisdictions where a settlement of the cases has happened, and we've come out of that favorably and had been able to release a particular tax provision that we did have in that number.

And then during the tax holiday period in Angola, which finished at the end of April 2019, any losses that we incurred in that particular period did not provide a tax shield. Now just to put you in perspective as to why it was lost. So the business is very significantly funded on debt. There's a 30% minority in this particular business, and they have not contributed in equity in any particular way. So when you look at it from a group perspective, it's an after-tax and after-interest perspective based on the 100% geared business. So if there was a loss in that particular period that you don't get a tax shield from, then the effect of this change in the tax law has increased the tax rate by 25 percentage points. So that's been a significant position. And if you recall, at half year, in this particular presentation, I've indicated that there was a shield of about 46% -- 46 percentage points that we would enjoy. That was before the law changed. And they just put out a very simple statement that said, "Terribly sorry. The law has changed. You can only get a tax deduction for 7% of your foreign exchange losses. The balance is not tax-deducted." So that's been an unanticipated consequence and quite a significant blow.

And then try to get from a normalized position with the 13.5% to get to the 46.8%, and then the hyperinflationary effects are just extraordinary numbers. And the reason they looked so big is because the profit is only ZAR 6 million after the ZAR 1 billion charge above it. So it distorts the percentages quite significantly.

If we have a look at the segmental contributions to revenue. I think you can see that there's no major difference in the real contributions, except to the fact that the Metals contribution has increased from 70% to 73%. And yet at the trading profit position, of that 73% contribution, they're contributing 88% of the trading profit.

If we have a look at it by region. South Africa has contributed 67% of the revenue, up from 63% last year. And despite the Rest of Africa only contributing 33%, they contributed 70% to the trading profit. So despite the risks out there, I think we're well positioned and it is a profitable and attractive places to be, and hopefully, the currencies can settle down.

And I think the point to make is that, going through the journey through Nigeria, the currency was pegged at the ZAR 199 level for some time. It was then unpaid. It went to ZAR 285. Then FX and NiFEX markets were introduced, and the currency has settled around ZAR 360. And it's been around that level for a good amount of time now. And we've seen no real foreign exchange impacts. In this year's numbers, the only foreign exchange losses that we've got are on those cash positions that are against the LCs. I think the numbers are around ZAR 200 million in Angola, and the rest -- the Nigerian position does not suffer that consequence anymore. So hopefully, the kwanza can find a level that clears the market, that both the importers and exporters and foreign investors like and that wage inflation can catch up and then demand should return.

If we go through the operational reviews at the revenue level. The -- I think in the Metals sector, Bevcan has done particularly well in a market that has obviously got 3 new entrants. The business has become leaner and meaner. I think they're focused on their costs. They're looking at their efficiencies. They produced stable results in a very tough environment. And I think, overall, the revenue is more materially being impacted by the Angolan position in that market. They've maintained their market share, and as André has indicated, have a very substantial market share. The market growth that we've seen in the beverage can market is well in excess of the GDP growth. And if you recall, at the end of last year, we took out the steel plate line in Cape Town. That had a capacity of around 600 million cans. I think that's responded very well to the new entrants and balanced the capacity up pretty well.

Operational efficiencies, Erik and his team are chasing very hard to get this fully dredged down and the speed of the line speeds up. And I think we're seeing some benefits there, and there have been annual savings of around ZAR 60 million from the change in the Epping structure.

DivFood has had a particularly tough year. It's reported a loss. We don't separately disclose that number within the Metals segment. There has, however, been some growth in the fish and milk and meat volumes, which is pleasing. The diversified can demand is really kind of reflective of subdued demand in our economy at the moment. And I think the loss of one of our big customers to a competitor in the second half of the year has impacted our numbers there.

I think we've spoken probably enough about the Angolan position. I think it's all being affected by devaluation in the currency there impacting the demand. There has been a very swift response to that by the management team in Angola, where there's been a 33% headcount reduction in response to that. So they responded well and the business is operating well. The steel plate line is being converted into aluminum. And you'll see when we get to the working capital section, we've had to invest ahead of that so that we can cater for the demand while that line is being converted.

Very good liquidity. ZAR 1.8 billion transferred from Angola in the period. I think this kwanza bond program has been a fantastic program for us. As André has indicated, over the last 2 years, it has given us a saving of ZAR 1.9 billion. They are honored in time, in full every time. And to the extent that you want an early settlement of those positions, there's between a 2% and 4% discount that you can pay if you need that. And the Central Bank then honors those payments early.

Bevcan Nigeria has seen some very good growth. They produced record sales. There's been 20% volume growth in both the malt and beer categories. And I think, again, they won the Business of the Year within our presentations last night. So congratulations to them. They've managed to increase their market share. And I think a very strong team and an established and dominant position, hopefully, going forward in that market.

The general metals packaging, they've had muted volume in Nigeria. They've had some disappointing results in East Africa. We responded pretty quickly there. There are certain restructuring initiatives, and there are 123 full-time employees that have unfortunately had to be retrenched to respond to changing market conditions.

It's an exciting initiative with the food can line where we are looking to get into that market. The total investment indicated is around ZAR 100 million. We had already spent ZAR 38 million of that when we did an acquisition of certain equipment out of the Botswana market. So it's a ZAR 62 million-odd investment to get it up and running, and Christiaan and his team are doing well to enter that market.

In Plastics, it's pleasing that the margin has improved despite a decline in the revenue. Trading profit is up at ZAR 209 million, up 6%. And I think the new management team in the Rigids business in South Africa has energized the business. They are focused so I think the customers are loving what they're doing. We've got many customers who were a little bit frustrated that are coming back to us saying, "It's nice to deal with a revitalized team." And they're doing some very good things. There are some innovations that they're talking about, which is being well received by the customer base. And I think the important thing here is there's no major capital expenditure that's required to drive the growth in this business. So I think it's about sweating the assets, and the operation is actually just improving themselves. And at Clinton Farndell's leadership, we are seeing some very good traction there.

The cost-reduction project continues. We've closed certain depots and warehouses, and certain sites have been consolidated. Those things often take a little longer than you originally anticipate. Often on the spreadsheet, it's easier than in practice. But good progress has been made there. So in managing costs down, we've achieved a ZAR 41 million saving in that environment, which is pleasing. And more pleasing is the fact that we are able to see some working capital improvements within that business. I think it's been quite challenging for some time. But with a new finance director in there working well with a new MD, they have managed to reduce quite nicely.

I think we've spoken quite a lot about the hyperinflationary impacts in Zimbabwe, so I won't dwell on that too much, except to say that it's very punishing getting the earnings translated at the year-end spot rate as opposed to the normal average, where there's a devaluation in the currency. And that's pulled back the numbers. We have been able to finance and run the Zimbabwe business, and I think it's a very important thing to note. Nampak has not provided any funding to Nampak Zimbabwe since April 2018. They secure the funding from their customers who provide them with the dollars. They also get dollars from export sales, and they use those dollars to place the orders on the Isle of Man, who then procure for them. We have not had to fund them anyway. They are self-funding and they are absolutely, unbelievably resourceful people that are able to satisfy their customer base in a very tough environment.

If we have a look the Paper results. I suppose the theme here is we've rationalized certain ways that we do things. We're looking at it from a hub-and-spoke manufacturing strategy perspective. Hunyani has unfortunately been impacted by the hyperinflationary impacts. There have been some stable volumes in those environments and a pretty healthy demand, export volumes for the hub for the tobacco cases. Liquidity remains challenging. And you'll see on the slide that I showed you just now the very low effective cash extraction from that business. They are cash-generative and they fund themselves.

The cartons business, we expect to receive approval from the Competitions Commission in Nigeria shortly. That will provide us with around ZAR 440 million with the proceeds to augment the expected proceeds of ZAR 1.4 billion from the Plastics -- the Glass business in South Africa. And we don't expect there to be any particular problems there.

In Zambia and Malawi, basically the theme is we've restructured and we responded to market conditions in those environments.

The portfolio optimization continues, and Rob Morris and his team have done well to manage in a tough environment in Glass and to Simon and Therese and the team that have managed the process of the disposal in [ILSE], it's been a fantastic achievement. And I think it's another credit to Nampak to say that what we said we're going to do, we've done. And we'll await the Competitions' Board approval. There have been revenue growth in that market. Our challenge remains essentially the production efficiencies and the Pack-to-Melt ratios because essentially, whatever you make, you can sell in that particular market. I'll just draw your attention to the fact that because this business is disclosed as an asset held for sale and discontinued operation, at a group level, depreciation was ceased from the 1st of April because you're going to recover that asset from the proceeds of the sale as opposed to the use.

The electricity supplier has improved recently, and I know that people will be looking to André for some good supply going forward out of there. The [wraps] has been functioning well. And there are ongoing fluctuations, but I think in a difficult environment, they have done well.

There's been a skill shortage in that business. It's quite a title to have, but we've appointed a chief bottlemaker. And we've been very frustrated by the process of being allowed to secure those skills in South Africa. It's taken us over 18 months to get the Department of Labor to grant us a work permit for this individual. So that's frustrated processes quite significantly. And we're pleased to announce that an operations director has been appointed in the last couple of months with a good amount of skill. So to the extent that they can make differences before it gets disposed of, that will be pleasing.

We expect the proceeds of ZAR 1.4 billion. We've taken all the costs to sell-through the income statement to date, and that is the expected value that we expect from the transaction. And the filing is at the Competitions Commission, and as André has noted, we expect a reply shortly.

Plastics Europe remains very challenging. It's a business that was quite dependent on 1 customer that has decided to vertically integrate. The volumes in that market at one point were around about ZAR 1.7 billion. They're down at about ZAR 790 million or ZAR 800 million mark now. There's a strong move for vertical integration. What we have done to respond to large transport costs is created a plant in Livingston, which is just outside Edinburgh. That plant has got some modern and very, very efficient equipment. It's taking a bit longer to install it than we wanted to. But André and I are actually on Monday, in fact, in a Board meeting to go and see how they're going. And that should relieve a lot of the pressure.

But I think the message here is that it's a business that we want to be exiting from. We ran a process very efficiently handled by some professional advisers overseas. We received 7 offers, 3 of which we forethought were credible. We're down to very final stages, and we expect to conclude this transaction certainly before the first half of the -- the end of the -- the first half of 2020.

So everybody has been involved in it. And then I think it's a great effort. And I think, as André has indicated, one of the things that's been a difficulty for us in disposing of this business is the unfunded defined benefit pension fund. There are about 1,400 people on that fund, and the liability moves around depending on mortality ages. And in that actuarial assessment of that fund, it's quite amazing that the cold weather can preserve you for this long because the mortality rates of the females in the actuarial calculation is 89 -- I'm sorry, 93, and the minimum is 89. So if you want to live for a long time, go and live in England. So I think that should add some strength to the balance sheet going forward.

If we have a look at the balance sheet. Reminding you that the assets held for sale are the Glass, Plastics Europe and the Cartons Nigeria businesses. Any real change from last year is the Plastics Europe business. It's gone onto that separate line. And the goodwill is a static amount in terms of numbers but moves in terms of the translation on a rand-dollar basis. If I can remind you, we paid $233 million for the Bevcan Nigeria business some years ago. And because the spot rate in rand-dollar has moved by 7% year-on-year, that changes the absolute value in rand terms. There's been no further goodwill paid during the period.

The property, plants and equipment. We've really spent ZAR 735 million for the year, ZAR 480 million of which is for continuing operations. The rest is for the plant in Livingston and around ZAR 92-odd million in the Glass business in the period.

Liquid bonds, we've done very well. You'll see in the income statement, they matured. Around about ZAR 1.5 billion has been converted into cash and used to repay debt. The bank balances have been significantly impacted by the devaluation in Zimbabwe, where we had around ZAR 1.1 billion last year in cash, ZAR 1.2 billion. That is devalued to around ZAR 57 million. So it's impacted the cash position by about ZAR 1.1 billion.

The equity value has been impacted by the charges through the income statement because of the accounting -- hyperinflation accounting for Zimbabwe as well as the profitability impacts for the period.

In terms of the non-current liabilities, there's USD 115 million that is due to the U.S. private placement noteholders at the end of May 2020. And because that's due within 1 year, it's reclassified out of long-term liabilities into the short-term liabilities. But that, by the end of next year, will be reclassified into long-term because in the revolving credit facility that was established in September 2018, there's a specific facility that's set aside there on a long-term basis to cater for that. So that will further strengthen the short-term liquidity position.

In terms of the cash extraction, I think the pleasing point to note here is that ZAR 3.2 billion has been transferred from Nigeria and Angola with ZAR 123 million -- at 123% extraction rate: ZAR 1.8 billion from Angola, ZAR 1.5 billion from Nigeria, and you can see, only ZAR 43 million from Zimbabwe. And that cash balance dropping from the ZAR 1.2 billion down to ZAR 57 million in the period. So we continue to do well in the markets where liquidity is possible. Clearly, Zimbabwe is the Achilles' heel at this stage.

From a cash flow perspective, if I can draw your attention just before we get lost in the detail here, to this number at the bottom, the net cash generated from operations before financing activities of ZAR 1.1 billion, up from the ZAR 324 million last year. And if we look from operations, the cash flows have been under pressure, where that has declined by 19% to ZAR 1.8 billion.

Working capital, I'll unpack for you in a moment, where we've absorbed ZAR 706 million. And there are very defined reasons and clear reasons why we've had to do that, and hopefully, that can normalize going forward.

Paid some interest and tax, and the cash generated from operations, down quite significantly.

The capital expenditure is up from last year but in line with what we budgeted for the period. So the capital assurance committee, that's run by Simon McGill, and he worked on closely with all the managing directors in the business. I think he has done a very good job in allocating the capital well during the period. The liquidation of the bonds, as that matured, have produced the ZAR 1.5 billion cash, and then we've repaid certain of the funding during the position in the year.

If we unpack the position from a working capital perspective. There's ZAR 384 million outflow of inventory, and a large proportion of that comes from having to build inventories in Angola ahead of the line conversion. The line 1, I think, will be down until the end of March next year, and we've had to make sure that we have sufficient inventories there to supply the market while that line conversion takes place. There's also a higher input cost for Hunyani in the Zimbabwe businesses. There's been a pleasing reduction in the investment in the trade receivables with that number decreasing. Remember, last year, the September year-end fell on a Sunday. And I did make a mention of it when we presented and said that the customers paid us late. You can see a far better position this year, where the year-end fell on Monday and the cash receipts are far better.

And then in terms of the lower utilization of trade payables, it's an adjustment to new trading conditions. A lot of our businesses have got long lead times. Certain of the inventory comes from far distances with lead times of 5 months. So there have been changing demand patterns. The businesses to the extent that they can now have adapted and adopted new kind of the demand planning. And hopefully, we can respond to those positions going forward quickly.

From a gearing perspective, the gearing has gone up from 37% to 68%. And that's a consequence of the Zimbabwe cash production of ZAR 1.1 billion and in the charge to the income statement through the devaluation in the Zimbabwe business. The covenants are sitting -- net debt to interest-bearing -- net debt-to-EBITDA is at 2.9, just below the level of 3, and the EBITDA interest cover at 4.5x.

Short-term liquidity ratios, I think you can see, are quite healthy, and with the acid test ratio indicating our flexibility to settle all its short-term liabilities without having to liquidate any of its inventories.

The graph on the right-hand side shows a net debt position of ZAR 5.7 billion, and I've explained the consequences of the hyperinflation on those numbers.

Here's a graphical presentation of the covenant positions. We are watching that very carefully. And I think, clearly, the proceeds of just under ZAR 2 billion from the disposals was to be utilized to settle those debt positions, and consequently, reduce the debt and the interest charges going forward. So we will closely monitor those positions.

Capital expenditure. We have a Scotsman who looks after our capital assurance committee. And we keep teasing Simon that he's got short arms, but he's done a very good job along with the team in managing this. And just coincidentally, the number comes out at a very -- in line with the 2017 figure. And if I can please just draw your attention to the fact that this ZAR 735 million is for continued and discontinued operations because it's a cash flow statement that's got both in it. The continued operations expenditure is around ZAR 480 million in the period. And if you have a look at the replacement CapEx, it represents about 70% of the capital expenditure. If you look at the significant projects, the Bevcan Angola line conversion, we spent around ZAR 114 million at this stage; Rigids South Africa, about ZAR 120 million; and Nampak Plastics Europe, ZAR 163 million, and that's on the Linvingston project. And I think whilst we're spending that money, it's been attractive to the new buyers to see that the new plant in Livingston. Glass includes ZAR 93 million, pretty much in line with last year. And then depreciation has obviously ceased because it's a production -- an asset held for sale.

The growth projects for 2020 include the food can line in Nigeria, as I indicated, and we expect a cash flow of about ZAR 62 million there. And then the total conversion of the line 1 in Angola is about the ZAR 280-odd million, and that's we spent the first part of that already. So hopefully, that unpacks the numbers.

If I can maybe just talk quickly to our performance scorecard against our strategic goals, which are the efficient allocation of the capital and the portfolio optimization, certain operations excellence and sustainability and innovation. I think congratulations to the team on the -- all the work that's gone into the sale of Glass. And that's, as you can see, going to change our position quite significantly as well as the disposal of Cartons Nigeria. The balance sheet optimization, we've still got as orange. I think we can do better on the working capital front. I think we can see, once the proceeds come in, the debt levels will change quite dramatically. And I think we've done very well in getting the ZAR 3.2 billion out of those foreign markets. So that's pleasing.

The operational excellence has been a nice turnaround in the second half in Plastics South Africa. Bevcan and its team has done very nicely in improving its efficiencies. The group as a whole, if we look at the numbers, the costs are down around ZAR 412 million. So the cost optimization has been good. I think the challenge is we now have to get the volumes back to drive the margins to accommodate the fixed cost structures that we do have.

The team has been very, very motivated to get the black economic empowerment scorecard addressed, and I think my team has done that. They've made a significant difference and we are very, very close to getting a Level 1 rating. We missed it by 0.65 of a point. So we were very, very close in getting it. And it's also on a strict interpretation of one particular agreement. But I think it puts us in very good territory to compete with the people in the market.

As André has indicated, the Crown license agreement allows us to then operate in different areas now. And we're looking at alternative packaging opportunities and some very good export opportunities from South Africa, I mean, the food can market and also looking at certain joint ventures in the carton manufacturing.

So I hope that unpacks the numbers, and we will take questions afterwards. Thank you very much.


André Marinus de Ruyter, Nampak Limited - CEO & Executive Director [3]


Thank you, Glenn. Now we have the opportunity for questions. The team and I are available to take questions.

So any questions that anybody wishes to raise? Please wait for the microphone before you ask your question because there are people following us on a podcast, and otherwise, they can't hear the question.


Questions and Answers


André Marinus de Ruyter, Nampak Limited - CEO & Executive Director [1]


Anybody? Kgosi?


Kgosietsile S Rahube, Citigroup Inc, Research Division - VP [2]


André, just maybe a quick question for you. If you look at the last sort of your 5, 6 years whilst leading Nampak, is there anything that you would have done differently to what you have and just your feeling about where Nampak is settled? I know you've touched on the strategy, et cetera, but just anything that you would have done differently.


André Marinus de Ruyter, Nampak Limited - CEO & Executive Director [3]


Of course, your hindsight, of course, is an exact science. When you look back, there's always stuff that you say you should have done earlier, you should have done more quickly, you should have intervened more quickly, in Glass, for example, and sold that business arguably before it consumed more capital. I think the major challenge that we've had has been the fact that we were exposed to huge macroeconomic volatility, black swan events, tail risks, call them what you will. But I think those have really hamstrung business in terms of pursuing the profits that we would have liked to deliver. And certainly, I think that a lot of the good work that's gone on in the background in terms of fixing the operations, improving the way in which we run the business, those have gone unrecognized because of the fact that, for example, the net ZAR 1 billion impact from Zimbabwe. That just obscures all the good work that's gone on, for example, in our Bevcan business. So it's been a very interesting and challenging ride, that's for sure. And I've learned a lot. And hopefully, I will take those lessons with me into my new job.

Other questions?


Unidentified Company Representative, [4]


There's one here from Munira Kharva. She's wondering what would you say are the normalized free cash flows for this business going forward, taking into account that we generated ZAR 260 million of cash flow from operations and after the CapEx this is a negative free cash flow. I think Glenn has touched on why our working capital absorption was so high. So her question is what would -- what are the normalized free cash flows going forward?


André Marinus de Ruyter, Nampak Limited - CEO & Executive Director [5]


Glenn, would you like to have a stab at that, please? I sense Munira is populating a model as we speak.


Glenn R. Fullerton, Nampak Limited - CFO & Executive Director [6]


Thank you for the question, Munira. I think the answer is depending on what the exchange rates are. And it's an area that is very difficult to predict. What we should be doing is, from a working capital perspective, is having a cycle that has the trade payables funded -- no, the inventory funded by the trade payables, and we should be funding the high-quality trade receivables book. And that's a methodology that we're trying to push into all of the businesses. So to the extent that there's absorption of working capital at the moment, as I've indicated there for abnormal kind of reasons.

But in normal circumstances, where the turnovers come back, like it should -- it has done now, we should have a release of working capital under those circumstances. So I think Simon's running the cash management committee. He sits with all the finance directors. He's putting in some good structures to do that. So to the extent that there's been this absorption of ZAR 700 million, that number should really be flat, 0, if the turnover is flat. So I think that's the way we want to get it and stop having that big number being absorbed in the working capital. I would love to see a normal working capital absorption as long as the activity ratio stays constant because that would mean then, we're funding real growth. So it's a balance between getting activity ratios right and how it's impacted by foreign exchange in those other markets.


André Marinus de Ruyter, Nampak Limited - CEO & Executive Director [7]


All right. Thanks, Glenn. [Diego], any other questions?

It's a remarkably restrained crowd today. I will be meeting with some of you later on, on a one-on-one basis. And then we've also got some meetings scheduled in Cape Town, where we will be engaging with more groups and more investors. So we look forward to meeting you there, and thanks very much for your support and engaging criticism over the past 5 years. Thank you.