John Bortlan: Group MD, Nampak

MONEYWEB, Byron Kennedy, 01 November 2004

Today’s breaking news and John Bortlan discusses the sale of Nampak’s ‘short run’ plastic packaging business in Europe, explaining the difference between ‘short run’ and ‘long run’ businesses.

MONEYWEB: Good evening and a warm welcome to our listeners. This is the Moneyweb Power Hour with Byron Kennedy. My colleague Alec Hogg has been scorching up the fairways over the last few days, but he’ll be back in the hot seat tomorrow night. In tonight’s programme the property industry charter is in the spotlight and that follows a speech today to the industry by the Minister of Public Works, Stella Sigcau. We’ll also have comments on those developments from independent property economist Erwin Rode.

Tomorrow brings with it the US election and we’ll get the last-minute views from the likes of Moeletsi Mbeki, who’s our President Thabo’s brother, about the impact it could have on South Africa. Arthur Buchner our market watcher will also have some views on that, I’m sure, and a little later we’ll look at the decline in Investec’s Purchasing Managers’ Index and what it means for our economy.

In breaking news on the JSE today the largest of them all, Anglo American, put out a statement to say that it won’t take legal action against government in what the industry sees as expropriation of mineral rights. More on that story if you want detail at www.mineweb.com. Also a profit update from Rainbow Chicken – that company in the process of finishing off its interim results and it says that it expects those to be released on the 24th November. Good news for those invested in the share. Earnings per share are expected to rise by between 25 and 35%, with headline earnings a little more muted, but that line should increase by between 15 and 25% according to Rainbow Chicken, and that stock went up just 1% on the back of that news. Year-end results out of technology outfit Set Point today. Those show a 44% improvement in headline earnings per share, the dividend up an more impressive 50%. But, as the group says, declining interest rates and inflation means that it’s poised to benefit from the growth in the South African economy.

And Nampak has sold off its short-run plastic packaging business in Europe. John Bortlan, the chief executive officer of Nampak joins us now. Start us off, John, and tell us what a short-run business is.

JOHN BORTLAN: Hi, good evening Byron. Yes, really there’re two sides to our plastics business. The one we call “long run” and that’s probably the easiest to describe…

MONEYWEB: What’s the difference between the two of them, then?

JOHN BORTLAN: … that really serves the dairy industry and it’s focused on continuous production of same-sized and same-shaped bottles, where “short run” is a lot of different types of bottles serving the agrochemical market, lubricant market, plus lots of other industries. So there are many changes and the production runs for those bottles actually are inconsistent, and therefore we call that a fast-changing type product, and therefore we call it a short-run business.

MONEYWEB: With short run was it a case of selling your way out of a problem?

JOHN BORTLAN: Yes, it was. This has been identified some time ago. We haven’t been able to make the appropriate returns. I think we’ve been saying for some time that we need to find an industry solution. That could have taken any form, be it a merger, be it an acquisition, be it a disposal, and I think the opportunity for the disposal came up and so that’s what we’ve gone for.

MONEYWEB: You’ve sold it for £23m – that’s around R255m at today’s exchange rate. What did the business cost you initially?

JOHN BORTLAN: Well, of course it wasn’t bought in that form. So it’s really a part of a much larger business that we bought when we acquired Plysu and when we acquired BlowMocan many years ago, so it’s quite hard to break it up and say well this is the value of the business at that point in time. I think really one’s got to look at the current circumstances and we’re happy that the disposal will mean that it’s earnings-accretive for Nampak, and we also have a very valuable property that it frees up for disposal and to realise some cash on.

MONEYWEB: I did ask you the question of what it cost you initially, but can you give us a sense of the price that you got – was it in line with what you expected, better or worse?

JOHN BORTLAN: We would have liked to have got more because I think you will have seen in the announcement that the net asset value is about £31m. So we have sold this short of net asset value, about £8m, but, as I say, we obviously took all these factors into consideration and we believe that’s a fair and reasonable price for the market and the conditions that we face in that market.

MONEYWEB: The cash that you’re going to raise, that R255m, what’s the plan to do with it?

JOHN BORTLAN: It’s really to pay off debt and to fund further investment. We have no particular plans other than to support our existing businesses in Europe.

MONEYWEB: And which investment specifically would they support?

JOHN BORTLAN: Well, first of all, we have quite heavy borrowings in Europe, so in the first instance we would want to reduce those, and of course there’s always capex investments, new products, new developments – and it just reduces our interest burden in the European market.

MONEYWEB: John Bortlan, the chief executive officer of Nampak finishes off our breaking news. They sold off their short-run plastic packaging business in Europe for R255m, £23m – and as he told us it’s about £8m shy of the net asset value off £31m.

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