Nampak Limited (NPK) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to Nampak's annual results presentation for 2020. Let me start off by apologizing for the delay. It was not related to the numbers itself. But, unfortunately, the reality of working from or getting teams to coordinate from remote locations do not -- be a little bit more challenging than anticipated. And the new JSE requirement that is -- requires us to publish the final annual financial statements on the same day as this announcement caused us some hiccups. But again, please accept our apologies, and let's move on to the actual results. So first of all, the forward-looking statements. You've seen that before. It's in the pack. I'm not going to go through that other than to ask you to take note of it. And then on to the 2020 overview. We're going to start off with going through the salient features. Now let me start off by saying that this was really a difficult set of results. It was a tough year. I don't think it's been any different for many other companies. We all know what we all personally had to deal with. But going through the results, needless to say, these are not pretty results. Overall, it's dominated by the massive impairments that we had to do on the goodwill in Bevcan Nigeria as well as the assets in Bevcan Angola, our Plastics operation in South Africa as well as DivFood. So overall, we reported a loss for the period of ZAR 4.3 billion. And like I said, the main feature in there was the big impairment. If we then turn on to our turnover, our turnover reduced from ZAR 14.6 billion to ZAR 11.3 billion, that is down 23%, mainly as a result of the weaker economies where we've operated in and, of course, the massive impact of COVID-19. So overall, our trading profit are down by 56% to ZAR 682 million. We can, however, report that we generated cash to the extent of ZAR 1.1 billion from our operations. But overall, we still -- it still resulted in an operating loss of ZAR 283 million for the period. So our HEPS from continuing operations was down to a loss of ZAR 0.78 per share, while our HEPS from total operations are down to a loss of ZAR 0.88 per share. As a result of the reduced profitability, we had to renegotiate our group funding covenants. We are happy to confirm that we have complied with these relapsed covenants. Net EBITDA -- sorry, net debt-to-EBITDA ratio was achieved at 4.94x, which is below the upper limit of 5.25x that we agreed. And at the lower end, EBITDA interest cover was at 2.55x compared to the lower limit of 2.25x. So for covenant purposes, the EBITDA that is used in the calculation amounted to ZAR 1.1 billion for the period. Then on a more positive note, the net proceeds from our disposals and the sale of liquid bonds amounted to about ZAR 2 billion. These proceeds were utilized to settle some of our U.S.-denominated debt. And we reduced this debt from 75% of total debt down to 66%. I also have to mention that subsequent to year-end, a further ZAR 1 billion was utilized to reduce the U.S. dollar-denominated debt. That was from a rand facility, and we managed to reduce our overall U.S. dollar debt, like I say, subsequent to year-end, down to plus/minus 45% of our overall debt. So we've made new strides in reducing that exposure. Some of the key operational successes that we would like to report. First of all, the renewal of some very key contracts for Bevcan South Africa as well as Bevcan Nigeria. Secondly, some very significant export contracts, not only for Bevcan South Africa, but also for Bevcan Angola. And I'm also happy to report that before these contracts were only for canned bodies, we're -- now we've also extended that for a very significant demand of beverage can ends to the tune of very close to 1 billion ends. So overall, I think we are very satisfied that we managed to remain cash-positive throughout the year despite the impact of COVID-19. And of course, that's been as a result of all the mitigating controls that we put in place to reduce the burn of cash. So overall, if we look at the impact of COVID-19 on these results, given the massive impact that it had, we all know about the lockdowns that came in from the end of March 2020. Of course, that was not only in South Africa, but we also experienced that in some of the other major economies where we operate. If I can start with South Africa, of course, this -- the restrictions included a ban on most social events. And then also a very significant -- the ban on the production, distribution and sale of alcohol products that was with us for a full 3 months during this period, and had a huge impact, more significantly on our metals operations, and you'll see later on that our metals operations have been the hardest hit of all our different businesses. So in Bevcan itself, of course, we couldn't sell any of our cans and ends to the brewers, and there's also been impact on a lot of the associated products, the complementary products, like, for instance, mixers, et cetera. And then in our DivFood operation, the impact of the alcohol ban had a huge impact on our closures business, where we sell closures for the wine and spirits market as well as some of our diversified products that were categorized as nonessential and, therefore, could not be produced during the initial hard lockdown. In our Plastics business, we couldn't export some of the bulk drums that we produce, and there was also quite a significant impact on the smaller packs. And that is sort of on the immediate consumption products like smaller PET bottles, et cetera. Very similar impact like cans. It's a very -- it's similar sizes and, therefore, the inability of consumers to roam around freely initially and sort of congregate in big groups and have events, that has had quite a big impact on these packs. On the Paper side, we produce conical cartons for the traditional beer markets, the mageu market, and because of the ban on alcohol, of course, they could also not sell those products. In Nigeria, there was no alcohol ban, but just general restrictions, reduced volumes. Of course, they could also not have any social events, but we'll get back to Nigeria. Overall, I think that's probably been the best market for us. And especially later on, things improved a lot quicker. In Angola, similar situation exacerbated by the impact of further currency devaluations. And then a very significant impact there has been the closed borders where cans are one of the favorite packs for exportation into the DRC. That border, unfortunately, has still not opened. And as a result, we've seen very weak demand in Angola. In Zimbabwe, we had a mixed impact. Certain sectors benefited. For instance, where previously, we had competition from imports of tobacco cartons, those -- we could supply now. So -- although also a lower demand overall due to COVID, I think we've seen ups and downs. The big feature of our results in Zimbabwe has actually been the impact of hyperinflation, which Glenn will address a bit later. So what did we do in response to the impact of COVID-19? Well, the first thing, we all knew we had to conserve cash as much as possible. Of course, there was a huge uncertainty. Nobody knew initially what the true impact will be, and we had to pull down on all possible costs that are within our control as much as possible. One of the things we've done is to implement a salary sacrifice. That was based on a sliding scale that started at 30% to executives and then further down to about 15% for junior management. Of course, it's a -- we had additional scrutiny in absolutely all types of expenditure. We made sure that any type of expenditure has to be authorized at a much higher level, and we really made sure that we're not incurring any expenses that we can avoid. With the changes in demand, of course, the big question was, how do you handle the working capital. We had huge uncertainty on forecast? At the same time, we had massive orders still coming in based on previous orders planned. And as a result, we had to reduce our inventory planning cycles, literally to do it on a day-by-day basis. And as a result, we did manage to pull quite a bit of funds out of working capital. But we are still in that cycle. Of course, the demand is now increasing, and it's now all about making sure that we can adequately service our customers. The next step we did, of course, was to put in a capital freeze. We made sure that wherever we had a CapEx that was not legally already committed to, we tried to stop that. So we only go -- gave the ga ahead to those expenses or capital expenditure that is of an absolute high sort of nature. And as a result, our CapEx has come down significantly, which we will focus on more later. So it was all about nimble decision-making and getting processes in place to handle the uncertainty. I think we've been quite successful. To date, I think we've been able to service most of our customers without any problems. There certainly has been impacts on the supply chain where we could not do the required stock builds when we were not allowed to produce certain products, and we are dealing with the impacts of those with the specific customers that might be affected. So overall, it was really about seeing how we can reduce expenses. We also looked at the fixed cost of our business. Some of these processes were already planned beforehand, like for instance, the restructuring in both our Plastics operations and DivFood. And I think we can report that those restructurings are going well and are -- will be completed during the current financial year. This is F '21. We will see significant benefits already flowing through during F '21. And of course, the full benefit of these restructurings will come through in the next year. Of course, with every crisis comes some opportunity. And the next slide, I'll just spend a bit of time on what some of those opportunities are. So as you might have heard, we've entered into significant contracts for the exportation of cans. And that is based on a global trend in support of sustainable packaging. So first of all, there's this negative sentiment to have single-use plastic, and that's driving demand for -- globally demand for aluminum cans. On top of that, the lockdowns in -- specifically in North America and Europe, caused much higher home consumption during this period. And as a result, most of these territories are completely out of capacity. Although they are all busy building more factories and putting in more production lines, that capacity is likely to only come sort of online in about 12 to 18 months. And as a result, it's created a short-term opportunity for us to use our unutilized capacity in South Africa and Angola to supply these markets. So we are very happy that we could sort of react in the short term. And I think that will do -- in fact, it will add a lot of profit to our bottom line during the next 12 to 18 months. And as we are getting our sort of revenue and demand up to pre-COVID levels, it will certainly fill a lot of gaps. So overall opportunities for Nampak, 2 significant contracts secured. Like I said, both from South Africa and Angola. We've now also added ends contract to that. So overall, I think it is going to be good for Nampak going forward. If I then go on to the operational review, so the 3 business clusters that we have: Metals; Rigids; and Paper, the hardest hit has been the Metals cluster, as I've described before. So overall trading profit dropped by as much as 70%, down to ZAR 421 million, where the impact has been a lot less on Rigids. And in fact, almost negligible on our Paper cluster. To start off with Metals, and I'm going to start with South Africa. So as I mentioned, trading profit down significantly, 70%, down to ZAR 421 million profit, and that was as a consequence of a revenue drop of 28%. Looking at Bevcan in South Africa. So overall, still a strong operational performance. So from a commercial point of view, we defended our market share. Where I think the market was expecting us to lose market share a lot quicker, I think we've proved to the market that it's not going to be that easy for our competitors to simply come in and take all the business away from us. So we renegotiated a contract that was going to come to an end at end of March next year for a further 3 years. And although, we had 100% allocation in this contract before, we've gone in with an 85% allocation. This is what we put in a bid for and we were successful in securing those volumes. So overall, of course, the reduced volume had a very significant impact on our profitability. And in South Africa, the loss contribution resulted in a halving of Bevcan SA's profits. I've already mentioned the export contracts. I'm not going to talk about that again. Then moving on to DivFood. As previously reported, we lost a significant contract in the middle of last year. Of course, this was the first year where we've seen the full impact of that contribution loss. And then COVID-19 also had an impact on this market. For food cans, initially some stronger demand, but lower fish and meat can volumes has reduced profitability in this business. On the diversified side, as I mentioned, most of these products are deemed non-essential, and we were unable to manufacture that throughout the hard lockdown. And a similar impact on Metal closures, where the alcohol ban resulted in some lost volumes. On the positive side, huge sort of progress has been made to reduce our operating cost. We've completed Phase 1 of Project LEGO that is all about getting this business back to profitability. We are in the process of Phase 2 at the moment. That should be completed by about June, July next year. And we should see the full benefit of that coming through in FY '22. However, with the improvements that we've already made, we are very confident that this business will return to profitability in F '21 despite incurring quite a big operational loss during the current year. As a result of the lower market for this business, we had to process impairment of ZAR 224 million, and this included a goodwill impairment of ZAR 37 million. If we then move on to Metals in the rest of Africa. Nigeria, as I mentioned before, still very good operational performance. We've gained some big contracts from our competitor. Although we've had a reduction in one of our contracts where we had an 80% allocation down to 50%, in a bigger contract, we've actually gained volumes from, give or take, 50% up to 100%. And as a result, we believe we have gained market share for 330ml cans, and that is a contract that is going forward for another 3 years. Overall, yes, we've seen volume declines over the total period because of the market that dropped, but demand is recovering much faster in this territory. And as previously reported, both September -- sorry, both August and September were record months and at quite a bit higher volume than we've seen before the lockdown. So we are very confident that things are still on the way up. But because of the overall slower demand in the market, we had to process the goodwill impairment, as we've already communicated during our half-year results, of $130 million or the equivalent of ZAR 2.2 billion. In Bevcan Angola, I think, again, Kwanza devaluation had a very significant impact, and the lagging wage inflation resulted in lower demand. We -- I've already mentioned the borders that were closed during the lockdown, and as a result, quite significant volumes lost on the export side. Again, management there was very quick to reduce the cost base. Sadly, we had to reduce the -- our headcount there by as much as 60%. And that was all about ensuring that we can remain at a breakeven profitability for 2020. So again, like I say, we had a positive EBITDA in that territory. So we did not burn cash. But at the same time, I think there's a huge opportunity going forward on that market. So as a result of the slower market, the increased overall risk profile of the country, we are to increase the half-year asset impairment that we've put through to a total of $69.8 million or the equivalent of ZAR 1.2 billion. So again, volumes are up there. But until such time as the market to the DRC or the border to the DRC opens, we expect volume to remain under pressure. So overall, good liquidity there. We managed to transfer ZAR 1.1 billion out of that territory. And you'll see, there's a reconciliation of the cash position in our long-form announcement. So I'm not going to get into the detail of that there, other than stating that the ZAR 1.1 billion is not a net amount. That is the -- that's just the indication of the available liquidity in the country. And that's after all the raw materials that we sent into the country, the amounts that we could get out to pay for those raw materials. Of course, we will try and keep on hedging up our cash in country as far as possible through the kwanza bonds. But unfortunately, no further such bonds are being issued by the government, and therefore, the position forward might get a little bit more difficult. As reported before, we've also secured a very substantial export contract that we will supply from the end of this year. This will require us to complete the conversion of line 1 from steel to aluminum that we -- if I can remind you, we have bought the completion of that conversion process due to the COVID lockdown. There's a very small amount of work still to be completed. And in fact, this export order is giving us the idle opportunity to complete that conversion, so that we then have the flexibility of 2 different lines that, of course, can operate on different sizes and contribute positive to our overall contribution. Moving on to the general packaging line -- metals packaging line in Nigeria. I think this -- overall, we were quite satisfied with the performance of that market. It was under pressure last year. I think, overall, it's recovered. A weak trading environment in Kenya persisted, but slight improvement of profitability in Tanzania. Next, we are looking at our Plastic cluster. Yes, this profitability also reduced not as much as our Metals sector. So overall, despite revenue only contracting by 6%, we had a 27% decline in trading profit from our Plastics business. And this is actually quite a sad result in the sense that this business was really on its way to return to profitability. Huge improvement operationally and from a cost point of view. So as we mentioned in the half-year results, this business was heading towards a profit again this year, until we were hit by the volume reductions coming from the pandemic. So it still incurred a small -- Plastic South Africa business still incurred a small trading loss for the year. But it's operating on significantly improved margins. And hence, we are very confident that in the new year, we will also see a big improvement coming from that business. Then our cartons business in South Africa, that's also included in this segment of the business. Of course, they were impacted by the loss of volume due to the alcohol ban, as I already mentioned. But they've also launched a couple of new products like WATER IN A BOX. Sadly, some of those product launches had to be sort of delayed because of the travel restriction. And then as we reported before, a very exciting development in this business is the newly-formed joint venture with Elopak, which will allow us to grow our footprint, not only in South Africa, but also the rest of Sub-Saharan Africa. And that will give us a bigger reach into the fresh and aseptic beverage markets. In the Rest of Africa, good operational performance, as I mentioned, in Zimbabwe, despite very challenging economic conditions. Again, this business continued to self-fund, and we did not have to put any new funds into that territory. Of course, hedging cash there is very difficult. And therefore, whatever cash they generate, they try and reinvest into the operation and equipment or raw materials. Moving on to our last cluster, the Paper business in the Rest of Africa. This business actually improved its profitability. So trading profit has gone down by 1%, but you'll notice that the margins increased quite healthily from 15.2% to -- up to 16.7%. So we're quite happy with that increase. In Zimbabwe, Hunyani did very well. As I mentioned before, they benefited from reduced imports for tobacco cases. And again, they were self-funding. A very challenging operating environment. As we -- as you know, liquidity for ForEx there remains challenging. And we were only able to transfer ZAR 9 million out of that territory. So again, they were limited to only produce product to the extent that they can source raw materials. Zambia and Malawi, of course, much smaller territories. Zambia, the bigger one, again, affected by a lockdown. And that's affected similar demand, like the Paper business in South Africa for conical cartons; where in Malawi, demand was fairly stable and slightly improved profitability there overall. So that's the end of our operational review. I'm now going to hand over to our CFO, Glenn Fullerton, that will run you through the financial review.

Thank you, Erik. Good afternoon, everybody. As Erik has indicated to you, it's been a very tough year at a revenue level, where revenue of ZAR 11.3 billion is down by 23%. There's been lower demand in Angola, weak trading conditions and reduced activities, which have resulted from the lockdowns caused by COVID, and that's affected key markets. There's also been the disposal of Cartons Nigeria, which was in the prior year number. It was not classified as a discontinued operation in the previous year because it was neither large enough from a geographical or segmental point of view. Trading profit, down 56% to ZAR 682 million. And again, that softer demand, Angola has made up a large portion of that decline. And then there's been a COVID effect and a loss made by DivFood. Going through to the operating loss of ZAR 283 million, affected by the same factors, but then there have been certain additional foreign exchange losses. There's been a loss on disposal of the Cartons Nigeria business, and that was really the recycling of the foreign currency translation reserve into the income statement. And there have been certain retrenchment and restructuring costs. Pleasingly, we've generated ZAR 1.1 billion cash, and that's in line with the same level as last year. We've responded very well in terms of working capital management, and that has resulted in cash from operations of ZAR 415 million, being up 57%. There have also been lower taxes paid in the year due to lower profitability. The net proceeds received from the disposals of the 2 businesses as well as liquid bonds of ZAR 2 billion has been used to reduce U.S. dollar-denominated debt, and there's been a pleasing reduction from a proportion of 75% of our total funding, down to 66%. And as Erik has indicated, a further ZAR 1 billion from rand-denominated facilities has been used to reduce that further to around 45% post the year-end. The cash transferred from Angola and Nigeria of ZAR 2.4 billion gives you a sense of our ability to access dollar liquidity in that -- in those 2 markets. It has slowed a little bit in the second half, but we are pleased in Angola, we have 92% still hedged. And only 29% in Nigeria, where it's far more difficult to get a hedge. If we have a look at the headline loss from continuing operations, that is at ZAR 500 million compared to headline earnings of ZAR 349 million in the previous year. From total operations, there was a loss of ZAR 565 million compared to a loss of ZAR 125 million in the prior year. And then the headline from continuing operations per share of ZAR 0.776 compared to a headline earnings of ZAR 0.54 in the previous year. ZAR 0.877 is the headline loss from total operations compared to a loss of ZAR 0.194 last year. The group funding has been managed in a difficult environment. We remain well-funded. Our restriction is obviously the amount of EBITDA we produce, but we're pleased to announce, as Erik has indicated, the compliance with those covenant levels, albeit relaxed levels, where those covenants have been relaxed to a net debt-to-EBITDA of 5.25x, we've come in at 4.94x. And then an EBITDA interest cover, a floor of 2.25x, we've come in at 2.55x. So we have adequate facilities. There's good short-term liquidity. And as volumes pick up and result in further profitability, we'll have funding to access the liquidity needed there. Net impairments of ZAR 4 billion is a feature of the numbers, and we've had to take a very hard look at future forecasts. A very, very detailed process has been followed there, where we've had to impair Nigerian goodwill of ZAR 2.2 billion, the Angolan assets by ZAR 1.2 billion and Plastics South Africa assets by ZAR 424 million. And then in DivFood South Africa, there's been an asset and goodwill combined effect of ZAR 224 million. Pleasingly, our net inflow from working capital of ZAR 367 million. And I think the management teams have reacted very quickly to changing market conditions. And I would draw your attention to the fact with long lead times, where often they have 5 months, the teams have done very well to produce a cash inflow of ZAR 367 million compared to an outflow of ZAR 705 million in the previous year. If we have a look at the detailed income statement, you can see the detailed numbers, ZAR 11.3 billion turnover, down from ZAR 14.6 billion last year. So that's a 23% decline. And really, the effect of COVID, subdued economic activity and very subdued economic spending in Angola, where wage inflation has lagged the currency devaluation. The COVID effects on the trading profit, I've -- demonstrate to you in a slide that follows, but trading profit of ZAR 682 million, down from ZAR 1.6 billion. There have been certain capital and non-trading items and we separately identify those for you as ForEx losses of ZAR 324 million from Angola and Nigeria. There have been restructuring and retrenchment costs of ZAR 135 million. There's been a net loss of ZAR 141 million on the disposal of the businesses. And I'll draw your attention to the fact that there is an accounting entry on consolidation, it is not a cash loss. And ZAR 136 million loss on restructuring of the financial liabilities, where we've had to early accelerate previously capitalized costs or prepaid costs on facilities that will [indiscernible] in terms of IFRS 9 does require an immediate write-off in the financial statements in the year where you restructure the liabilities. And those costs have been partially offset by insurance proceeds of ZAR 83 million. The Zimbabwe impacts, from a foreign exchange point of view, I'll unpack for you in later slides, but essentially, a dollar-denominated liability has been removed from the ZWL functional set of accounts in Nigeria -- in Zimbabwe, and that really is the reason for that significant reduction. The finance costs, for the first time adopting IFRS 16, which is the leasing standard, which requires the capitalization of the leased assets and the liability to be brought on to the balance sheet. Included in the finance costs for the first time are ZAR 129 million associated with that. Each lease payment is split between a capital element and an interest element. And the new accounting standards requires that to be included in interest paid. If we take out the effects of that, for comparative purposes, interest paid is up 5%. Where there's been a significant reduction as the interest received, where there's been a 41% reduction there, and that's primarily due to the decline in the U.S. dollar-linked Kwanza bonds where we've converted those back into cash and repaid dollar debt with that amount of money. I draw your attention to the fact that we received the Glass proceeds at the end of the first half of the year and on the 30th of March. But overall, because of the reduced level of profitability, we have had on-average higher debt. The net impairment losses we've spoken about, and we've set those out for you very clearly. And the capital items, we'll draw your attention to the fact that they're excluded from the headline loss per share. In the discontinued operations, we've made a profit of ZAR 369 million, and that's primarily from the disposal of Nampak Plastics Europe, where we've disposed of net liabilities, principally derecognizing a defined benefit pension fund liability that we have on the balance sheet and any other liabilities. We sold that business for a nominal amount, and it was a recycling through the income statement of a foreign currency translation reserve. So the loss for the year from total operations of ZAR 4 billion is primarily represented by the net impairments of ZAR 4 billion. We've tried to set out a source of change at the trading profit level and show you how it's moved from the ZAR 1.6 billion down to the ZAR 682 million. And really, it's really a function of a ZAR 3.4 billion reduction in revenue. At the contribution level, that has resulted in a reduction of ZAR 1.5 billion to our earnings, and that's been affected by COVID and weak economies. To counteract that, we've had certain salary sacrifices. There has been reduced overtime, and we've saved ZAR 238 million in that regard. There have been some depreciation impacts. We've been very aggressive, as Erik has indicated, on controlling the costs that we can control and managed to save ZAR 318 million in that regard. So -- and then there's been the impact of the IFRS 16 leases that gets us back to the ZAR 682 million. So I think the takeaway from this particular waterfall graph is that the knock-on effect from reduced turnover and the loss contribution associated with it has been inevitable because of COVID, but the items that we could control, we've controlled in a meaningful way during the period. In the capital and other items, we've included a list on the slide, which sets out quickly the net loss on disposals of ZAR 141 million, insurance proceeds of ZAR 83 million and then the ForEx losses have been quite significant in Angola and Nigeria, where the currencies have depreciated and/or the excess of currency at higher rates. Unfortunately, we've had restructuring and retrenchment costs. And then, again, there's that restructuring of the financial liabilities that's required an acceleration of previously capitalized costs. Now those costs were paid for in 2018. It's effectively been a prepayment that has been accelerated. So not all of that is a current cash cost. The feature of the results is a weakening in the rand against the dollar, where average rates have been 13% weaker. The closing rate is 10%. A big feature is the weakening in the kwanza, which is devalued by 64% year-on-year. And then the currency in Zimbabwe has devalued by 436%. So that's clearly impacted the results quite significantly, and we'll unpack those for you as we go forward. Trying to demystify the hyperinflation accounting. I've put together 2 slides, and I won't go into every last detail of these now, but it's a takeaway for you in your own reading. But essentially, where you consolidate the businesses of Zimbabwe, you have to translate the foreign currency assets and liabilities first to the Zimbabwe currency. And then we have to hyperinflate them. And then we do a spot translation. And because this is a currency that is in a hyperinflation environment, we have to translate the full year at the closing exchange rate of ZWL 81.44. So it reduces the rand consolidated accounts significantly. In the prior year, we reached an agreement with RBZ, where they've undertaken to settle us on a one-for-one basis in United States dollars. We took a conservative view and raised 85% as an expected credit loss against that. And we're holding our view at 85%. And to address this in the current year, we have entered into a revocation agreement between our funding arm by Isle of Man Nampak International Limited in our Zimbabwe business, in terms of which it has waived its right to receive the $67 million under the RBZ agreement with the Reserve Bank, and the Reserve Bank will pay them directly. And what it effectively does is it removes a dollar-denominated liability from a functional currency income statement that would be subject to foreign exchange losses. Economically, the group would end up in the same position. And we do hope that -- over time that we will be repaid that. So it's a mechanism that has avoided significant foreign exchange losses going forward. If we try and have a look at what's happening within the Zimbabwe environment, we've put together a graph here that shows that the -- effectively, the exchange rate has gone from 6 to 0.2 in terms of the Zimbabwe dollar to the rand. And the hyperinflation rate has gone from an index at 30th of September last year of 290% to 2,205%, which is effectively an inflation rate of just sort of 660% in the period. It has caused the requirement to adjust the financial statements to comply with the hyperinflation. And effectively, what's happening is in all this complexity, we are consolidating the Zimbabwe results at 20% of the rate that they were translated at in the prior year. The net foreign exchange losses that are accounted for in this business now effectively represent the losses on external dollar-denominated liabilities having removed the intergroup dollar-denominated liability. So the impacts going forward should be less, and we'll have to monitor that going forward. If we have a look at the discontinued operations, really the discontinued operation is made up of the net loss on disposal of the Glass division of ZAR 146 million and then a net profit of ZAR 515 million for the Nampak Plastics Europe business. And you can tie that back to the front of the income statement. We've avoided a pension fund liability in the Nampak Plastics Europe business of significant amount. Also, a capital program that would have been a drain on our reserves, and we are pleased with the outcome of that transaction. If we have a look at the balance sheet. Clearly, the property, plant and equipment has been impacted by the write-downs of ZAR 1.2 billion in Angola, ZAR 131 million in DivFood South Africa and in Plastics of ZAR 270 million. The goodwill has been impaired by ZAR 2.2 billion, primarily related to Bevcan Nigeria. There's been small impairments related to DivFood in South Africa. Where there are other movements, it's purely the rand-dollar exchange rate because the majority of that goodwill is dollar-denominated. And the feature of this balance sheet is the initial recognition of the right-of-use assets. Effectively, that is the lease of our property portfolio, which has been brought on for the first time, and there have been certain impairments associated with that relative to cash flows to follow. And you can see quite a significant liquidation of the bonds, which have matured and certain bonds that have been sold, with that balance solely reduced from ZAR 862 million down to ZAR 140 million from a long-term perspective, and their short-term portions that have been classified. The Gearing in the balance sheet has been materially impacted by the capitalization of the finance lease liability, and Gearing has gone up from 68% to 149%. And that is also affected by the ZAR 4 billion charge to the income statement for the impairments. If we have a look at the secured loans and current liabilities, we utilized an unutilized facility that was separately set aside to settle the amount of $115 million that was due to the U.S. private placement holders of -- we settled that on the 28th of May. And that's moved from short-term back up into our long-term portion of our balance sheet. And the secured loans have, however, been affected by 10% weaker rand and the ZAR 1 billion mandatory repayment of our funding by the 30th of September, which have now been included in the current liabilities. The short-term liquidity does remain sound, although it has been affected by that reclassification of the ZAR 1 billion. What I would just indicate to you is that in terms of the renegotiated facilities with the banks, the ZAR 1 billion is shown as short term, but the property, plant and equipment elements of potential assets that will be disposed off have not yet been reclassified into short term, so -- because we have not yet met the 6 requirements of IFRS 5. So there's a slight mismatch there. And I have presented on a slide later, a pro forma current ratio and asset test ratio. The feature of the last 6 months has been a successful renegotiation of our covenants and the compliance with those relaxed limits. It has been difficult in a time where the business has been affected by reduced volumes. But we're pleased to report that in both cases, we have complied with those covenants. What we have set out here is that it's a railway line effectively of what we need to comply with for the period to September '21. And what you will notice here is that the covenants return back by September '21 to the originally contracted positions of a net debt-to-EBITDA of less than 3x and an EBITDA of greater than 4x, EBITDA interest cover. What is a feature of the numbers is that the EBITDA is based on a rolling 12 months EBITDA. And because of the lockdown and how it affected the early parts of our financial -- second half of the financial year this year, those effects only start falling off the rolling 12-month average by April 2021, and that will be a positive impact as those filter through into the numbers. The covenants will, however, be measured on a quarterly basis as opposed to previously on a 6-monthly basis. And a very important point is that the internal budgets do indicate that we can return to historic covenant levels by September 2021 without any disposals. So the asset disposals that we would be looking to achieve during this period of ZAR 1 billion would benefit the covenants and reduce our overall Gearing. If we just focus on the deleveraging milestones that are contained in the revised banking facilities with the funding partners, we have a very clear and targeted plan at deleveraging the group by September 2021. We've met the first 3 milestones, where we had to appoint an independent adviser to give the funders assurance that our valuations of our potential assets for disposal were at least at the ZAR 1 billion level, and we've complied with that. And those valuations have been completed by independent parties. We've also in receipt of nonbinding offers for the disposal of these businesses in excess of ZAR 1 billion. So the first 3 milestones have been complied with. We will be working through this time table, and we expect to receive binding offers for those businesses by the 31st of March 2021 and executed sale and purchase agreement for each of those potential businesses by the 30th of June 2021. And then a conclusion and cash flow associated with those transactions by the 30th of September, which would result in a permanent repayment of our senior financial indebtedness of at least ZAR 1 billion. If there was an inability to do that, we would have to look to raise other capital. But the indications are that the nonbinding offers exceed the minimum ZAR 1 billion. If we have a look at the Gearing, it has been elevated. I have indicated to you that at a total borrowings level, it's increased from 68% to 149%. If you exclude the capitalized finance leases, that's at 115%. And we've complied with the debt covenants, as we've indicated. The rand-dollar has obviously impacted that, and we're very pleased that post the year-end, we've ended up with a debt portion that is dollar-denominated of around 43%. So we aim to work down these levels of Gearing in the 2021 financial year. The short-term liquidity is sound, although it's been impacted by this mandatory repayment of debt by September 2021. Including the current portion of liquid bonds, we're sitting at 1.7x cover, up from 1.5x last year at a current ratio level. At an asset test ratio, it indicates that we can settle all our short-term liabilities without having to liquidate any of our inventories. And if we adjust for the ZAR 1 billion that is sitting in the current portion that is due back to the banks without the reclassification under IFRS 5, the pro forma current ratio would be 2.3x, up from 1.6, and the asset test ratio would be 1.4x, up from 1.1. So the balance sheet short-term liquidity is sound. We've transferred ZAR 2.4 billion from Nigeria and Angola, ZAR 1.1 billion from Angola, ZAR 1.3 billion from Nigeria. As Erik has indicated, a very, very small amount from Zimbabwe. We do have 92% of the cash hedged in Angola and 29% in Nigeria. The net movement in the year is a reduction of ZAR 624 million in cash if you compare the two to cash positions, and we aim to ensure that we use that cash to settle dollar-denominated liabilities in the Isle of Man. Cash generated from operations, it's been very difficult, upfront, as you can see, where cash generated before working capital of ZAR 720 million has declined by 61% from ZAR 1.8 billion. There's been a significant change in the working capital, which has resulted in cash generated from operations being marginally down from last year, and we've generated ZAR 367 million as opposed to consuming ZAR 705 million in working capital. The interest paid is slightly up by 9%. Retirement benefits, significantly down by 45% to ZAR 78 million. Taxes are clearly down because of profitability. And the cash generated from operations of ZAR 415 million, up 57%. We've controlled the capital expenditure well during the period. And the future capital expenditure, we would be looking to control in an even more conservative manner. Included in that ZAR 666 million is ZAR 213 million for the step-up project in Angola, which was the conversion of line 1 to aluminum. And then a feature of the investing activities is the net proceeds and disposal of businesses of ZAR 1.6 billion and the liquidation of certain of the bonds, where we had an inflow of ZAR 457 million, resulting in a total cash generated from operations before financing activities of ZAR 1.8 billion. And then we've essentially used that ZAR 1.8 billion to repay debt during the period, and leaving us with ZAR 11 million worth of net cash generated for the period and net cash and cash equivalents at the end of the year, up 3%, to ZAR 1.4 billion. And look into the working capital. We've managed to decrease both our inventory holdings and the trade debtors. Trade debtors is clearly a function of lower trading activity and internal management. So there's been a cash inflow of ZAR 1.2 billion just before we've had an impact on our trade payables. Now there would be a lower utilization of creditor funding because we've slowed down the purchasing. And on a relative basis, the absolute value of the creditors last year versus this year would show a reduction, and that's what that ZAR 793 million is representative of. But we're pleased that we've managed to turn the working capital around from a ZAR 705 million absorption to a ZAR 367 million inflow. The capital expenditures, as you can see, from 2016 through to 2020, there's been a significant decline. It's been relatively range-bound for the last 4 years, and we would expect those numbers to be significantly less going forward. The business is well-capitalized. There are no particular large capital programs that we are looking at. And as I said, in that ZAR 666 million is ZAR 213 million related to the template conversion. The replacement CapEx is the majority at 81%, and the future CapEx is significantly lower in the plans that we have. And I'll hand over to Erik. Thank you.

Thank you, Glenn. So moving on from the financial review. I'm quickly going to take you through our strategic view and the way forward. So I think it's fair to say, and I'm quoting John Keynes here, that when the facts change, I change my mind. So looking at our previous strategy, the key objectives or the 2 main key objectives were unlocking further value from our base business as well as accelerate African growth. As we communicated before, we had a look at the second objective there, accelerate African growth, and I think it's fair to say that's where we had a review. So more recently, I think it's fair to say that our African growth objective did not deliver the intended results, despite us from an operational point of view, performing extremely well. And maybe just to give a bit more clarity, I think we mentioned before that better operations in Angola and Nigeria are among the best operations we have. So in these operations, we are very efficient. We're running at the highest efficiencies we have and properly at the lowest spoilage. So in terms of executing these investments in Africa, we were extremely successful. And hence, the confidence we had earlier, when we've seen growth in these markets to invest further, and I'm talking there specifically about the first -- after the initial success in Angola, the investment in Nigeria. And then subsequent to that, the investment into a second line in Angola. Of course, since 2015, things have changed quite dramatically. And I think it's fair to say that we realize that there's much more risk in these territories than what we originally anticipated. We've mentioned the high dependency on single commodity, specifically oil. We all know what happened to the oil price first at the end of 2014, start of 2015. And then, of course, another collapse in the oil price just before the COVID lockdown. And the consequence of lower activity in the rest of the world had significant downward pressure on oil. I think we're all happy to see the oil price now normalizing or maybe we're not all happy to see it. But certainly, from these economies, they are very happy to see a higher oil price. So I think with the vaccines sort of in the near future, we are already seeing the oil price moving upward. But overall, in Africa, we've seen weak economic growth. The economic growth that we anticipated for, for instance, Nigeria did not come through. We've already spoken about the large impairments we had in both those markets. And in both of these markets, we've been hammered by foreign currency shortages, and those resulted in significant ForEx losses. So overall, I think it's fair to say that despite very good operational investments well-executed, the results are not what we anticipated. And hence, we had to reevaluate our position. And hence, we said we are not going to accelerate or we're not going to reinvest in Africa at this point in time. We first want to see some profits coming from these regions. We want to see them showing their true potential. And then we will reconsider investing in them again. And maybe it's worth mentioning that in Nigeria, our volume performance at the moment is actually doing very well. Before, we did roughly about 700 million cans a year. We've extended the capability of that line through some internal improvements, up to probably about 1 billion cans. So we are seeing that additional capacity being absorbed at the moment. And our customers are certainly telling us the significant growth coming into that market over the next year. So there will certainly be pressure on us to look at a second line in Nigeria, and we are not saying that is completely off the table, but we will look at that CapEx a lot more carefully. And we needed some convincing before we will trigger any further investment there. So overall, I think we want to reduce our overall exposure to the Rest of Africa and maybe see if we can diversify our overall geographic footprint, but that is something, of course, that we'll only do once we've got our balance sheet under control. So I think the underperformance of the Rest of Africa investments clearly gave us a very high exposure to U.S. dollar debt. And because of the drop in revenue and profitability coming out of those economies, it's placed the overreliance on our South African balance sheet and the need to repay debt, specifically dollar debt from South Africa. So at the moment, the mix of our debt, although a lot better than where it was before, I think it's not ideal yet, and we still want to see if we can reduce the dollar debt even further. So overall, these markets where we operate are complex. It's -- there's a lot of earnings volatility. And as a result, we remained at very high Gearing levels, and that we felt is exposing Nampak and our shareholders to undue risk. So this is something that we wanted to address. So how have we done it? So we've gone through a realignment of our strategy, and this strategy has got 2 key objectives. The first one is about reducing risk. The second one is about growing profits. And in the building blocks contained and the indeed include, first of all, the strengthening of our capital structure; secondly, the simplification of our business; thirdly, optimization; and finally, growth and innovation. So to get into a little bit more detail for that. So what we said is it's important for us to focus on what we can control. There's a lot of things that's outside of our control, the different economies, how they perform. We can't pull out of those economies in the short term. So for now, we get a control of those things that are within our control. So if we look at reducing risk, we want to see how we -- can we deleverage. Glenn spoke about the commitment we gave to our lenders to reduce net interest-bearing debt by at least ZAR 1 billion. So we've got clear plans in place to do that. Of course, we also want to reduce the currency risk by changing the mix of our debt by having less exposure to U.S. dollar debt. And in that process, so after we generate more cash through all the plans coming from simplification and optimization, we hope to create the capacity for future growth. So at the moment, clearly, we are constrained in terms of our ability to invest in new opportunities. But the first priority at the moment is to get the Gearing under control, reduce the balance sheet risk and thereafter, we can look at future expansion opportunities. From both a portfolio perspective as well as a product perspective, we are looking to simplify the business. It is not only our portfolio and products that are complex, but even though accounting associated with operating a lot of these countries are hugely difficult. And I think as analysts, most of you will appreciate that you understand Nampak's financial structure and our results is quite difficult. And that is something we would like to make easier, simplify, not only for us to service our customers, but also to look at the processes within our business, so that we can make it as easy as possible for our operators to produce the product. And in the end, we want to service our customers to the best of our ability. But we found that the simpler we can keep things, the better we will do overall. So the next one and the objective of grow profits is about optimization. This is nothing new. I think that links to the old objective we had about continuing to leverage our base businesses. But the focus there is a lot of that will be on process innovation, which also links to the next milestone or building block. So we will not only do process innovation, but also look at some new product offerings. Like I say, some of it will be new products, but we will also look at taking away some products that we do not believe is giving customers the right level of value. And we will also look at the terms of how we trade with both our customers and our suppliers. Overall, we are a manufacturing company. The focus will always be on improving our operational efficiency. And then last, but definitely not least, is sustainability. There's a huge focus in our company to reduce our carbon footprint and make sure that we operate as a responsible manufacturer and also the way we operate within the communities where we do business. The final building block is around growth and innovation. Like we said, we want to expand into new markets to diversify our earnings, also improve our profitability. And that talks to a number of different areas. So the one is geographical. So as we said before, we used to be limited to operate in Sub-Saharan Africa. That was due to the technology agreement we had before. That technology agreement came to an end at the end of last year. We did not renew that. And that has now enabled us to look at new markets. But as I said, we will not do that until we have our balance sheet under control, and we have the right capacity for further expansion. In the meantime, we are definitely looking at exploiting some niche market segments in some of our businesses. We are looking at new products, specifically in the Paper business, there's a number of niche products that we're already exploiting. So some of that, you'll see coming in over the next year. And, yes, overall, different product and service offering, and a lot of the focus there will be on innovation. So if we move on to the outlook, a very quick roadmap, and I'm not going to go through all the details here. So this roadmap has got 2 sections. First of all, it is sort of broken down between the reduced risk element and the growing profits side. But also then, the first column is the current year that we've -- or the last year that we've just finished. So there are some of the successes that we've already achieved. I'm not going to repeat all of that. But clearly, we've reduced our debt profile quite considerably already, the specific mix after utilizing some of the proceeds from the sale of assets. We removed some big liabilities from the Plastics Europe side. And of course, we have restructured both DivFood and our Plastics operation in quite a significant way already. And those restructuring exercises will be completed in the next year. We've discussed the renegotiation of our key contracts yet as well as some of the expenses that we managed to contain, with specific reference to our salary sacrifices. Looking at the next 2 years, as I mentioned, our #1 priority in the short term is to make sure we get our balance sheet under control. We've got relaxed debt covenants, but it is very important that we comply to those. We've committed to raise ZAR 1 billion of cash through the sale of certain assets. And we want to utilize that to improve our debt profile even further. Of course, in Angola, we'll continue to try and hedge as far as possible, but we have to warn that those opportunities will probably become less and less as we manage to extract money from our existing bonds. Going forward, we'll have to see what the availability of bonds are. So we need to make sure that by the end of F '21, we get back to the original covenant level of a net debt-to-EBITDA of less than 3x and EBITDA to interest cover of more than 4x. How will we do that? I've already talked about the cost reductions that we've had. And Glenn also referred to how we're going to limit capital expenditure. So just to give you an idea, the current year, we had CapEx of ZAR 666 million. The plan is to keep that to less than ZAR 350 million for the next 2 years, each of those. So that will be significantly down. But I can give you the assurance that, that will not impact on our ability to provide good quality product to our customers. And we are confident that for most of our major businesses, we are very well-capitalized at the moment. Like I said, the only big opportunity going forward is probably the investment into a second line in Nigeria. There are no short-term plans to do that. That will very much depend on that market first proving to us that it's worth looking at something like that. Specifically on growing profits, we've already discussed the completion of the restructuring in DivFood and Plastics. At the moment, that thing -- all of that is going well. We've also committed to no salary increases for our executives as well as our other managers for this year. And we've already mentioned the fact that our union has also accepted no salary increase in July of this year. Overall, I think we're going to keep on focusing on employee cost. We still feel that our employee cost is too high. There's a big project on that to make sure that we align our overall employment cost to market rates, and that is a project that we will continue into the next year. Some of the export contracts, we've already discussed. I think, first of all, if you look at South Africa, for all practical purposes, we have sold out the entire spare capacity that we have in South Africa for most of our lines. So I think that is a really exciting opportunity. And then, of course, the -- even in Angola, we will -- towards the end of next year, we will start exporting cans. So we will complete the conversion of line 1 from steel to aluminum. And we hope for that to be ready from about the last quarter of F '21 to start exporting cans to the rest of the world. Also significant volumes from Angola, so that contract will even benefit us into F '22. And of course, I've mentioned the exportation of somewhere between 700 million and 1 billion ends over this period as well. In Nigeria, we also look at expanding our capability to include 500ml cans. That will all depend on the volume pressure in the market and whether we will have enough off time to do a conversion like that. So exciting opportunity, but we will not compromise existing capacity in order to do that. And last, but not least, of course, is the joint venture with Elopak. We believe there is significant opportunity in this area. And it's really a lot of expansion that we can do into the Rest of Africa without any significant investment. Most of that would be done from our manufacturing facility in South Africa, and that will be through export process that we will service the rest of the market. So in conclusion, I think it's fair to say, again, I said it before, this was a very tough year. But I think one has to look through these results. Glenn mentioned that all those noncash adjustments that were made, the impacts on our profit from a capital nature, like the impairments, overall, where does it leave Nampak going forward? I think we feel that we are poised for much improved results going forward. First of all, after COVID, all our products still remain relevant. In fact, if you look at our biggest investments, they are in beverage cans, the global trend is in our favor. So there's a huge trend away from nonsustainable packaging towards more sustainable forms of packaging. We've already seen that trend getting much stronger in Europe and North America, even in South America, and it's only a matter of time and that all has to come to South Africa as well. So overall, it's all about our position to compete going forward. We've got -- we -- as I've mentioned, we concluded some of our long-term contracts. So we -- to a certain extent, we have some level of protection. And -- but more importantly, I think we've proven our ability to defend these markets. We've got projects that's all about reducing our cost base that will make us even more competitive. And we said, how are we going to do that? It will be all through simplifying our business processes and products, and also the additional focus that we'll have on a simpler portfolio. So overall, I think we're looking to an optimized footprint. And ultimately, that should reduce risk. It's all about getting our balance sheets under control and create that capacity for future investments. So that is in summary where we are. And before I conclude, I would like to really thank all our staff that assist us through this very difficult year. Everybody had to make some personal sacrifices. I would really like to thank all our staff for keeping our operations running while they were at personal risk, all of us, from COVID-19. People managed to keep their heads up and really it can't -- we could not have done it without the people that we have. I also want to thank all our suppliers that have really supported us through this period. We're looking forward to their continued support. And of course, finally, our customers. They've also seen a drop in demand. They had to work closely with us, and we thank them for keep trusting Nampak, and putting us in a position where we can compete going forward. And then, finally, I want to thank Glenn and his team for producing these financial results under extremely difficult circumstances. They all had to work from remotely, and we all had to really learn how to work. I think this is not unique to Nampak. We've seen that across the whole of corporate South Africa and the rest, but to Glenn and his team that worked through the night to try and finalize these results, thank you very much. And yes, we then move on to questions. Thank you.

Our first question from the webcast platform comes from Steve Sheppard, who's a shareholder. The question is, do you foresee a need to raise equity capital in the next year or two? And relating to this, can you see any growth or M&A opportunities arising out of the pandemic?

I think, first of all, we try and limit the need to raise capital. As we mentioned before, we've committed to the banks to reduce our net interest-bearing debt by at least ZAR 1 billion. At this stage, we are confident we can do that through the sale of identified assets. I have to caution that we will not sell assets at any price. So there is a commitment to reduce our debt. So we cannot say that there is no chance that we will look at equity markets, but we will do everything in our ability to avoid that. So the first option is definitely first to go for specifically identified asset sales. We will look at all internal self-help measures to avoid equity raise. But if we can't do that, then, of course, that option is always still available. But like I said, we would like to avoid that as much as possible.

The next question is from Andrew Moses from MIBFA. His question is, there is ZAR 1.9 billion of goodwill still on the balance sheet. What are the major components of the goodwill that is left?

Andrew, the major component is the remaining portion of the goodwill associated with Bevcan Nigeria, and that makes up the -- almost 100% of the balance.

The next question is from Mark Narramore from Excelsia Capital, and he's got 2 questions. The first one is, what is the current USD debt amount subsequent to the ZAR 1 billion paydown after year end? Please give in USD. Second question is, what are the current interest rates on the USD and South African debt facilities?

The debt position is $197 million. And, Nondyebo , the second question was?

Current interest rates on USD and ZAR data facilities.

Those will be disclosed in the detailed financial statements. The package that we've negotiated with the banks at the moment will have an elevated debt level for the debt for as long as the covenants are greater than the original 3x cover. So to the extent that the quarterly measurement period the covenant is greater than the original level, there will be a ratchet on the interest rate. And the full interest rates will be disclosed in the financial statements for both.

The next question is from James Twyman from Prescient Securities. His question is, could you confirm the U.S. dollar debt number now and the average interest rates? And the next one is, could you give an indication of the increase in production in Angola from the new export deal? How big is the export order now?

Okay. So I think the first question, Glenn already answered. The second one, the export order for Angola is about 0.5 billion cans.

Next question is from [ Brian Walton ] from Groundswell Holdings. His question is, what will the impact be on revenue and profits of the expected ZAR 1 billion asset sale? That is, how much do this currently add to revenue and profits?

Okay. I think, first of all, it's impossible to identify that yet. And the main reason is, there's a number of different assets that are being considered for sale. And you will notice that none of these at the moment are disclosed as assets held for sale for the simple reason that we have not finalized exactly which those would include. And the reason for that is, there's a number of assets, but we will look at the offers that we get in, in relation to the current profitability. And of course, we're not going to accept any offer that will be to the detriment of the group. So at this stage, we can't give you a good idea of which assets will be sold, and therefore, the impact on the group profitability. What I can assure you is that we're going to try and limit the impact as much as possible. And it will very much be something that considers a number of factors. Of course, the proceeds, the price that somebody is offering for it will play a big part. We will look at the amount of risk on each one of these assets, the amount of complexity. We've mentioned before that we want to look at a more sustainable product portfolio, not only from a profit point of view, but also from a pure product point of view. So yes, there's a number of different factors. So not an easy answer to disclose at this point in time which assets are -- will be sold. But we will take all those factors into account to make sure that we don't dilute the group from very profitable assets.

If I can just give you more color on those particular interest rates. On the local facilities, the year-end interest rate was 5.4%. And then on the foreign facilities, it's a blend between an average of 2.2% and 4.6%. And that is -- the higher level is impacted by the interest rate attributable to U.S. private placement funding that's left, and that's $60 million. And that I think is at 5.25%.

The next question is from [ Brian Uten ], Groundswell Holdings. His question is, margins in SA Metal business have declined significantly from 12.6% to 5.4%. Is this a function of lower volumes or also pricing pressures from new competitors in South Africa?

I think it's a little bit of both, a lot less from pricing pressure. The big impact is the loss of contribution. So metals businesses generally operate on a fairly high contribution percentage. And as a result, when you start losing volume and we've lost significant volume, you'll see that our overall profits has halved, but that has been mainly as a result of lost volume. I wouldn't be that concerned about pricing. Of course, pricing will always be under pressure in a competitive environment. But the main impact of these results is coming from volume. And we're already seeing those volumes bouncing back. Maybe it is worth saying that we've had a very strong start to our new financial year. So at the moment, we are quite upbeat about our volumes. But overall, in the beverage can side, it's not been a pricing issue. Then if you look at the diversified food side, as we mentioned, that business incurred a significant loss during the current year. And as a result, it had a bearing on the overall profitability for Metals. So a lot of what you're seeing there in terms of the lower margin is related to lower volumes and the impact of DivFood.

The next question is from Steve Shepherd, who's a shareholder. His question is, it sounds like you're moving into niche Paper product. Is that correct? If so, will you be attempting to compete with some packaging giants like, for example, Mondi?

Yes and no. I don't think Mondi is our big competitor. We compete on the paper side, more on the liquids or beverage packaging side. And therefore, we are competing with the big players in terms of combibloc and aseptic products. So that's where the new joint venture that we have with Elopak can take the big players on the -- in the markets on -- at their own game. So where we've had a fairly limited product range before, we can now take them on at a much broader front. So we will, of course, retain the niche products that we have in terms of conical cartons, but with the increased portfolio on the aseptic side, I think there's a much broader market that we can attack.

Next question is from Rajay Ambekar from Excelsia Capital. He's got 3 questions. Can you please elaborate on the financial impacts of each of the new contracts won? What do they add to revenue? And what margins are anticipated? Also, are these U.S. dollar-based contracts? And do you expect the contracts to be extended for longer than the original periods?

Okay. So first of all, we won't disclose the exact impact of it. What I can say is that the pricing in those contracts are similar to the contracts we have in South Africa. So they are in dollars, those. So the cans we're sending to North America, that is a dollar-based contract, but it's based on the pricing that we have in South Africa. So it is not at reduced pricing than our normal margins for those same customers in South Africa. Yes. Second one is dollar-based contracts. In Angola though, as you know, Angola is a very expensive territory to operate. So there, yes, these are at marginal costing. It is at lower pricing, but it will still make quite a significant contribution to the profitability for Angola.

The next question is from Glen Heinrich. He's got 2 questions. He's from Perpetua. His first question is, what is the remaining asset value of Bevcan Nigeria, excluding the goodwill? And also, what's the remaining value of Angola?

No, that's not something we disclose, unfortunately.

No.

Glenn's other question is, is ZAR 1 billion of asset sales enough to deleverage the balance sheet sufficiently?

I'm going to allow Glenn to expand on that. But first of all, keep in mind that we believe that our normal budget for this year will allow us to get back within the covenant. Now of course, we are not comfortable to be just within the covenant. So just getting below 3 is certainly not where we want to be. As Glenn pointed out, the additional ZAR 1 billion should get us down to, Glenn, just over 2?

Yes.

So overall, I think that will reach the objective. But we will monitor it as we go along.

As I indicated in my slides is that the internal budgets are built on a basis that we return to a level of net debt-to-EBITDA of less than 3x by September 2021 without any disposals. So our view is that the real impact in the business has been reduced demand, as I've demonstrated in those slides, and the significant impact on the contribution in the income statement. When volumes return and life returns to more normal levels, we have really optimized the cost base. And we would expect that additional profitability to flow through the income statement quite strongly. The internal budgets that indicate that we can get back below the 3x. I draw your attention to exclude the export sales that we have recently secured, so that would provide further headroom. The disposal of certain assets would just deleverage the business and make the debt levels more comfortable.

The next question is from James Twyman from Prescient Securities. His questions are, do you anticipate any new restructuring costs in 2021? Also, why did the retirement benefits fall heavily? Is this cash flow item improvement sustainable? And his last question is, when does the Angola export orders start?

Okay. James, first of all, most of the restructuring costs are already included in the current year. Glenn, I'm not aware of anything that are planned additional for next year, and anything might be a sort of loosely used word, but there's nothing at the moment that should be included next year. So if there's anything next year, it will be new initiatives and they are likely to be very little. So we're not outside of the current restructuring, we're not planning anything of a significant nature. The second question, Nondyebo?

It was regarding the retirement benefits. We've disposed of Nampak Plastics Europe with effect from 13th of December 2019. There was a contribution to that retirement benefit fund there of around GBP 2.9 million per annum, and that has reduced. And in the disposal of that business, if you have a look at our balance sheet, you'll see the retirement benefit obligation has dropped from ZAR 924 million to ZAR 776 million, and that is inclusive of the whole lot of searching and finding that we've done on the post-retirement medical aid ability in South Africa. And then in the liabilities held for sale, there was a classification last year of the pension fund liability, which has been derecognized now on the sale. So the balance sheet has been boosted by ridding ourselves of those liabilities in the sale process.

There's also a question about when the Angola export order begins.

Yes. So the Angolan export order, as I mentioned, will first require us to complete the conversion of line 1 from steel to aluminum. We hope to complete that by about June next year. So the exports out of Angola will start during the last quarter of next year, in other words, July '21 onwards.

Next question is from Rajay Ambekar from Excelsia. His question is, how do you plan to fill the spare capacity for DivFood? Are there any exports or local opportunities?

So I think, first of all, with the loss of volume that we incurred last year, one of the restructurings that we are planning is the closure of our 2-piece food line that's currently in Rosslyn. So the project [ LEGO ] will include consolidating our 2-piece volumes in Epping. So we are going to be expanding the capacity in Epping slightly by moving additional body maker down there. But essentially, there will be enough capacity in Epping to service the entire market. And in that process, we will gain some operational efficiencies. So at the moment, we are going to reduce capacity as a result of that loss of volume. But we do -- also retained volume for 3-piece food in our Vanderbijlpark operation. And therefore, we will have the capability to win back some of the orders from those we've lost. We've already been successful in gaining additional volumes down in the Western Cape. So yes, our improved profitability will come from a number of different areas for DivFood. The one is pure cost reduction, and the other one is additional volume for our operation down in Paarl.

The next question is from Paul Sanderson from [ Video ]. He's got 2 questions. The first one is around margins. Margins in H2 2020 deteriorated to almost 0 as a result of COVID. Please give us a steer on how margins have been improving month-to-month in H2 and into the new year per division. Also, in addition, what are the current operating rates for Metals, Plastics and Paper?

Unfortunately, we will never disclose the individual margins of our different businesses and definitely not from a month-to-month basis. What I can say is that since July, I want to say most, and it's probably close enough to say, all our businesses, the volumes have started to increase quite significantly. I've already mentioned Nigeria, where we've seen record volumes. In South Africa at the moment, our Metals business is operating at normal levels. So we are literally at the moment selling all the cans we can produce, which is very normal for this time of the year. Our DivFood operation has recovered significantly. There's one market segment that is still a bit slow, and that's on the fish side, but the rest of the market recovered quite well. And then also some of our diversified packaging is still a little bit slow on the shoe polish side. But overall, the business, all the volumes are pretty much returning back to normal. It is still early days, so I think one's got to be careful to try and forecast what that's going to be. But as I've mentioned, we've had a stronger start to our year than we anticipated, largely boosted by these export volumes. So in our October results, we've already had significant export volumes. There won't be any during November because we were converting the line to the required size for North America. But also, although it's still early days, the volumes we've also seen for Nigeria for November, looks like it's going to be another record month. So at this stage, we're very optimistic. It's still early days. But at the moment, we're trading well ahead of budget, and therefore, we remain optimistic that we'll have a good season.

Next question is from William Marshall-Smith. His question is, how competitive is Bevcan pricing versus its international competitors, [ Ball ], [ Commarcron ], et cetera?

I think we're very competitive. One's got to be careful when you try and draw direct comparison between any different regions. If you look, for instance, in Angola, can pricing there is much more expensive. And the reason is because of the high cost base off and the difficulty of getting raw materials into the market. In South Africa, it very much depends on the strength of the rand. But overall, we did not have to adjust our pricing here at all. As I mentioned, the pricing that we're exporting are at current prices that were negotiated with the specific customer. And I would say, overall, we are competitive.

The next question is from Mark Narramore from Excelsia Capital. His question is, when do you think DivFood will be back to profitability?

I'm very confident, Mark, that it's going to be this year. So during the last year, there's been a number of one-off charges that's gone through the results of DivFood. We've changed a lot of processes in that business in the supply chain. Like I said, we're reducing cost by moving some of our facilities down to the Western Cape. And maybe just to give you a bit more color on that. So because there is no ability to procure tinplate from ArcelorMittal in Fanabel (sic) [ Vanderbijlpark ] anymore, it means that all our tinplate are currently imported. And as a result, we're bringing that in through the ports, shipping it all the way up to [indiscernible]. We convert it there. And then the largest portion of our food can market is sitting in the Western Cape, which means we then transport those cans all the way down to the Western Cape again. So through the restructuring, we move a lot of the componentry and equipment down to the Western Cape, either to our Epping facility or Paarl. And as a result, we will avoid incurring the cost of transporting the raw material up to [indiscernible] as well as transporting it all the way back to the Western Cape. So I know that's quite a long answer, but hopefully, that gives you a bit more detail. But we are very confident that in 2021, DivFood will already be -- have a significant profit. And many of the benefits of our current restructuring will only come through in F '22. So therefore, there will be a big step-up into F '21 and even more to follow into F '22.

The final question is from Rajay Ambekar from Excelsia. His question is, what will the annual depreciation and amortization expense be now that the asset base has been written down?

It will certainly be impacted because the asset base is lower. I don't have that number off hand, but it will be lower than what it is now. It will also be compensated for, I suppose, as volumes increase because in some of the bigger markets, the depreciation is worked out on units of production basis. So as product -- production increases, so will depreciation. So it will counteract some of that, but I would think, overall, it will be lower.

That's all the questions we have. Are there any questions from the conference call to Erik and Glenn?

At this stage, there are no questions.

Okay. I would then like to thank all our participate -- or participants on this call. Again, apologies for the delayed nature of the presentation. But thank you very much for attending. And if there are any further questions after this, please contact Nondyebo from our investors -- Investor Relations department. We look forward to a much improved year going forward. And thank you very much, and goodbye.