Nampak Eyes Nigeria and Ethiopia for Glass Bottle Manufacture
NAMPAK has agreed with partners to build glass-bottle manufacturing plants to take advantage of growing demand for packaged consumer goods and bottled drinks in the two countries where a quarter of Africans live.
The Johannesburg-based company has reached a preliminary agreement with a partner for a factory in Ethiopia and is now seeking financing for a project with a potential cost of $68m, CEO Andre de Ruyter says. That will help supply drinks makers including brewer Heineken and soft drinks producer Coca-Cola, he says. Nampak has also “made good progress” on a Nigerian factory.
“Africa is the story for us,” Mr de Ruyter says. “People talk about Latin America, they talk about India, China or other emerging markets, but we think the opportunity that we’ve got in Africa is so big and this is what we know we can do well.”
Consumer-goods companies such as US retailer Walmart and brewer SABMiller are expanding in Africa to take advantage of economic growth and rising household incomes.
Many people in the sub-Saharan region are moving away from subsistence existences and becoming consumers of packaged goods for the first time, according to Mr de Ruyter, creating a growing market for can and bottle manufacturers. Nampak is also the continent’s biggest maker of beverage cans.
“There’s a youth bulge of people reaching drinking age” in Africa, Mr de Ruyter says. Producing glass bottles and cans “makes a lot of sense”.
Nigeria has a population of about 177-million, with 44% younger than 15, while 46% of Ethiopia’s 97-million people are below that age, according to US Census Bureau data. That compares with 16% of the 403-million people who live in the euro area.
Nampak is expanding beyond South Africa to help reverse declining profit margins in its home market, where it is cutting costs. The continent’s most industrialised economy contracted in the second quarter of 2015 for the first time in a year, while consumer confidence dropped to a 14-year low in the same period.
Nampak shares gained 0.2% to R27.80 in early afternoon trade on Wednesday, paring the decline this year to 36%. That compares with a 1% gain on the FTSE/JSE Africa all-share index.
In South Africa, Nampak plans to cut its number of glass products to about 85 different types from 130 to reduce costs, Mr de Ruyter says, and is also seeking to reduce its food-can range by as much as 38%. It is replacing older machines with more efficient models, he says.
Nampak has signed a memorandum of understanding with a local partner in Nigeria, identified a factory site with access to natural gas and water and started a feasibility study, Mr de Ruyter says. The plant in Africa’s biggest economy will cost as much as $100m and will be completed in about three years.
The company also has plans for an Angolan glass factory although it is still “very early days”, the CEO says.
Nampak will consider expanding its can production by doubling capacity in Nigeria and looking at a potential third can line in Angola, he says.
“Beverage cans are a fairly new innovation” in most of Africa. “Previously it was all returnable glass bottles, which were in some instances recycled up to 30 times. So you have this old, scuffed bottle and the new, shiny fresh can with a logo.”
RECOMMENDED ARTICLES
Comment
No comments found.