Nampak Limited (NPK) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you to those of you in attendance today. In my 35 year working career, the past 8 months can arguably be described as the most complex yet stimulating experience. The broad stakeholder engagement and multi-party vested interest in Nampak's investment thesis has made for an unbridled test of patience and understanding. I owe a huge gratitude to our shareholders, who have given us the benefit of the doubt by enabling our corporate repositioning by supporting the rights offer so generously. We have a clear perspective that this is conditional to unlocking value. Notwithstanding arduous discussions and negotiations, our thanks are also extended to our numerous lenders, which culminated in an elegant and workable new capital structure. I have little doubt that we've charted the appropriate pathway to success for Nampak. Doing business on the African continent, inclusive of South Africa, has become particularly onerous given consequent pedestrian economic growth, currency vagaries, leadership changes and policy uncertainty, which all manifest in constrained consumer spending and volatility. The Kwanza and Angola devalued 47% from the 6th of May within 46 days. The dual rates have widened in Nigeria, notwithstanding hopes of convergence with naira devaluing some 44%. Zimbabwe experienced hyperinflation and South Africa continues to languish under the pressure of low growth, high interest rates and inflationary conditions. This gives credence to the importance of executing the asset disposal and transformational initiatives with urgency. Just to remind you, our vision is to be the leading packaging solutions partner in select geographies. And this is underpinned by 5 strategic themes. Firstly, portfolio optimization and growth. Secondly, cost reduction and the extraction of efficiencies. Strategic customer management, building a high performance anatomy as an outcome and restoring the Nampak brand proposition, so too as an outcome. The high level performance metrics for F '23 are as follows. Cash generated from operations of some ZAR 1.6 billion within that a working capital improvement of ZAR 905 million and a trading profit of ZAR 1.6 billion, which was regrettably eroded by ForEx losses, impairments and a high interest bill. The most notable performance inhibitors we enter early are ForEx losses, non-recurring finance costs, which include ZAR 335 million of lender advisory costs, currency devaluation, muted consumer spending, heightened competition with predatory pricing and trading terms, and restructuring costs of circa ZAR 150 million. It's important that, we demystify the ForEx losses, given that there are 4 levels of exposure that give rise to this ForEx loss. In the first instance, we import around 80% of our raw materials and they are funded in dollars. We cannot hedge that position. There's partial recovery in price from our customers, but the Nigerian market must be one of the most price elastic markets in the world, and what you consequently see by passing on these price increases is not a modest volume decline, it falls significantly. The second exposure is the lag from when you invoice your customers until they settle their amounts owing to you, should there be any currency movements. The third exposure is the money that you have trapped in cash and debtors' balances that get restated and then transferred at weaker naira U.S. dollar rates. And then your fourth exposure is when you need to acquire the dollars and settle your foreign creditors accordingly. Glenn will elaborate on this topic in a little bit more detail. This was somewhat offset by a stellar performance by Bevcan in South Africa and a reduction in cash consumption by our registered plastics business. We should be reminded of the material non-recurring costs that we'll have the benefit of in F '24 and also the savings as part of our reorganization plans that will come to fruition in F '24 and so too, there will be materially lower ForEx losses that we anticipate into the new financial year. So let's have a look at our progress to date which has been executed with rigor and a sense of urgency characterize by a step change in working capital, a successful Bevcan and DivFood merger, a successful rights offer where 90% of our shareholders followed their rights and we were 38% oversubscribed. We managed to settle a new complex capital structure, Phase 1 of a Section 189, which has been completed and Phase 2 has been initiated, which will reduce our manpower costs significantly. We've had a step change as we promised in the DivFood profitability with a ZAR 77 million swing in that profitability. We have traction in our asset disposal plan, albeit at a slower pace that we would like. The strong Bevcan performance I refer to and then there's broad-based cost curtailment. There are significant work streams in motion, some of which have been completed. However, much work lies ahead of us. So at this juncture, I'd like to hand over to Glenn who will unpack the financials and then I will address the outlook, future prospect, risks and how we're going to mitigate them.

Good morning, everybody. Thank you for taking the time to attend. I'd like to start by focusing on some very significant financial achievements during the year, despite the ZAR 4 billion rand loss that has been reported. We've had a successful refinancing of our relatively complex funding structure and that gives us capacity of ZAR 8 billion. We've housed the ZAR 1.9 billion of historical debt in a separate structure that is not dependent upon EBITDA flows for the year, but rather dependent on being settled through the asset disposal proceeds that we will deliver over the next 18 months. So I think that's taken significant pressure off the covenant compliance, and I think working with the lenders, that's been a very, very meaningful step in the right direction. We've also created a flexible funding structure. This is underpinned by inventories, our trade receivables and security through our property plant and equipment, but that certainly provides a flexible funding package. So as aluminum prices change and volumes improve, the funding package behind that moves in tandem. So I think that's a very, very positive as well. We've negotiated more favorable funding covenants and that is very well set out in the financial statements and you'll see that that creates a very nice headroom for us. We've had an oversubscribed rights issue where that was 38% oversubscribed and that has augmented our equity base. We've raised ZAR 960 million net of the transaction costs and we've utilized that to settle dollar-denominated debt. We've also strengthened our shareholder base through that process with very good institutional shareholders being added and those institutional shareholders that were in the register following their rights. Significant de-risking of the group has occurred in the period under review. There's been a material reduction in the dollar component of the debt and that's reduced from 41% down to 5%, and I think that is a very meaningful step in the right direction and we've also materially lowered the short-term portion of our debt from ZAR 720 million -- to ZAR 720 million from ZAR 2.2 billion. The group's balance sheet structure has improved substantially. Our short-term liquidity is at 1.8x, up from 1.4x, so there's a very, very strong short-term liquidity position there and we have adequate funding headroom in our banking facilities. As Phil has indicated, we've improved our cash flows from operation. That is up 95% in last year. We've generated ZAR 1.6 billion from our operations and that's inclusive of ZAR 905 million from working capital that we've released. And then, importantly, as Phil has alluded to, we've reduced the fixed cost base in the business. We've merged 2 businesses. We've downscaled the size of our head office and you'll see some benefits coming through in FY '24 year. If we have a look at our income statement and we start at the top, we've had a revenue of ZAR 16.6 billion, marginally down from last year's ZAR 16.9 billion. We have had decreased volumes in our big businesses of Bevcan Nigeria, South Africa, Bevcan and DivFood. But we've managed to increase the trading profit by 2% to ZAR 1.638 billion. What we have seen in these numbers, they're really 3 key focus lines and those are the foreign exchange losses, which I'll unpack for you later, the net impairments and higher interest costs. There's been a relatively low impact from a foreign exchange position from Zimbabwe, where the hyperinflation has offset the monetary foreign exchange losses and I'll unpack that for you later. That ZAR 67 million just relates to an increase in our expected credit loss ratio on the RBZ financial instrument. The net impairment losses are significant at ZAR 2.8 billion and those really do come from predominantly an impairment in the African regions, and I'll unpack that. What you can see in the capital and other items are the ZAR 1.2 billion in foreign exchange losses. There's been a retrenchment cost of ZAR 150 million, but we have also been able to partially offset that by profit on disposal of certain property, plant and equipment of ZAR 139 million. The finance costs or material in this set of numbers up 109%. We've been higher interest rates in the period. There's been a 200 basis point increase in the repo rate and then we've had higher funding costs from the 1st of April and as Phil has alluded, there's ZAR 335 million embedded in that number of once-off interest costs related to the refinancing. I'd point out to you that the per share statistics have been adjusted for the 250 for 1 share consolidation. We did issue an additional 5.7 million shares post the consolidation as part of the rights issue and that was in a ratio of 2.2 shares to existing shares that were held. If we look at the operational performance, the metals division produced a revenue of ZAR 12.3 billion and a trading profit of ZAR 1.4 billion, but it has been materially impacted by the foreign exchange losses in the rest of Africa, and that is predominantly through Nigeria, and we'll have a look at that a bit later. The plastics business, it just short of ZAR 3 billion, has produced an operating profit of ZAR 224 million. That's slightly above its trading profit. There has been a ZAR 36 million profit on disposal of our crates business and partially offset by retrenchment costs in that business and Paper's performed well with revenue up 28% driven by the performance in Hanne and with the operating profit up 38%. If we look at this from a segmentation point of view, the splits of revenue between South Africa and the rest of Africa remained relatively constant from last year where you can see the revenue is 2/3s from South Africa and 1/3 from the rest of Africa. Profitability, however, is slightly different. If you look on the right hand side, you can see the operating profit in South Africa has increased by 17% from ZAR 412 million to ZAR 482 million and where it's changed dramatically is the operating profit from the rest of Africa which has declined as indicated on the slide. What we have seen in the corporate side and it's probably important that we unpack that, there are certain one-off costs in those numbers, but I draw your attention to the prior year that included a ZAR 222 million once-off credit from a pension fund surplus from the Malbak Pension Fund that was partially offset by once-off loss of ZAR 50 million from an insurance claim in the Isle of Man, and in the current year, we have got an expected credit loss ratio amount of ZAR 65 million in the numbers of ZAR 49 million loss on liquidation of our NHUK business and the DivFood Botswana business and then we've had certain unrealized foreign exchange positions on FECs at the center and there's also been ZAR 33 million worth of retrenchment costs. We do expect significantly lower head office costs going forward. If we have a look at the Nigerian ForEx losses, they really are emanating from a very dysfunctional currency market where that market is starved of liquidity for dollars and there's a tremendous lag between the date of originally pricing the goods to the customer and eventually settling the foreign creditor. If you look across those exchange rates that we've highlighted, there's weakness across all those exchange rates, predominantly in the naira decline of 44%, the Kwanza by 47% and the ZWL is devalued by 88% in the period. I remind you that, the group's earnings have benefited from the dollar denominated foreign subsidiaries or for weaker around dollar exchange rate. Our debt has however been affected by the slightly weaker spot rate at the year end. On the right hand side of that slide, you can see we've had just short of ZAR 700 million increase in these foreign exchange losses where the loss from Nigeria has increased from ZAR 604 million to just over ZAR 1 billion in the period and the profit that we made in Kwanza last year of ZAR 60 million has now translated into a loss of ZAR 179 million in the period. If we look at the impairments, very clear from that 3 year trend that the economics in Angola and Nigeria have changed dramatically and particularly in the September '23 year end where there has been a material increase in the weighted average cost of capital. In Angola, that has increased by 280 basis points from 14.9% to 17.7%, and in Nigeria by 410 basis points from 12.5% to 16.6%. The Nigerian change has resulted in goodwill of ZAR 1.5 billion being impaired. That cannot be unimpaired going forward in terms of the accounting standards. The items on the right hand side there, the ZAR 1.1 billion and the ZAR 179 million, at some time in the future when the WACC rates normalize and the cash flows improve. We do have the ability to reverse those impairments. But what you can see is higher country risk premiums and increased interest rates have driven those views along with a different outlook looking forward as a consequence of elasticity of demand with weaker exchange rates impacting consumer demand in those regions. If we look at the finance costs, as indicated earlier, up 109%, the repo rate up 200% and we refinanced at 1st of April initially. The final refinancing came through for the full deal on the 25th of September '23 and those at higher interest rates. What we have had in the period is higher on average working capital. In the last quarter there, we did improve that dramatically, hence the ZAR 905 million released from working capital and embedded in that ZAR 335 million once-off finance cost is ZAR 88 million of the previously capitalized finance costs that have had to be expensed in terms of IFRS 9 as part of this material change in the refinancing and then cash costs in this period of ZAR 247 million related to that refinancing. I draw your attention to the refinancing of the U.S. private placement notes. That interest rate of 5.25% was set 10 years ago as a fixed rate. Clearly, world interest rates have changed dramatically over that period of time and the new rate that has been set to 12% embedded in those numbers has obviously impacted the numbers. What we did do though is utilize a significant portion of the rights issue proceeds to reduce dollar denominator debt so it will shield the cost going forward. We only received the rights issue proceeds on the 22nd of September. So in this particular period, there's no relief from the rights offer proceeds but you can expect to see that relief through the numbers as we go through into FY '24. And I've just set out what the interest rates are at the closing period. You can see they are quite elevated as we go through the asset disposal program. We would expect those to taper off sometime in the future. This is a bridge that plots the relative movement at a profit before taxation point of view that tries to explain what has happened in the period. We had a profit before tax of ZAR 59 million last year, and we've got a loss of ZAR 3.8 billion this year. So there's effectively been a ZAR 3.9 billion movement in that number in the period. Now, if we try and have a look at what's happened, there's ZAR 200 million worth of once-off credits in the prior year that haven't repeated themselves this year. And we step back and have a look at our macroeconomic impacts. They're probably around ZAR 3.1 billion and those are encompassing the impairments that have come through, the ForEx losses, the increase in the RBZ, ECL and certain of the hyperinflation adjustments. And a large proportion of those are beyond management's control. When the WACC rates change, we have the ability going forward, supported hopefully by improved volumes for certain of those asset impairments to be reduced going forward and we should hopefully improve the equity base and the profitability going forward. Then there's the restructuring costs and the incremental interest has affected those numbers by ZAR 600 million. So I think that's a quick picture that shows you the movements through that period. If we look at the balance sheet, the refinancing and rights issue have positively impacted this balance sheet. We have got ZAR 13.9 billion with assets. Obviously the ZAR 2.8 billion of impairments has reduced our asset value but a very focused reduction in our working capital has resulted in a reduction in inventories from ZAR 3.9 billion down to ZAR 3.4 billion and our trade receivables from ZAR 3.3 down to ZAR 2.5 billion. And Phil and I and the team have been working very hard to improve the working capital velocity and you'll see that in the net working capital days later. The short term liquidity ratios are healthy and the shareholders' equity has been materially impacted by the impairments and effectively the impairment of ZAR 2.8 billion reduced our equity by 61% in the period. The refinancing as we've indicated is very pleasing in these numbers and the important point is we've turned out the debt to the 31st of March, 2026 and we've got 2 short term portions, 243 million which is due on the 31st of March next year and very importantly, we have already secured proceeds from our disposals to already make sure that that repayment is secure. And we're working very hard on making sure that the ZAR 477 million is also going to be secure and the asset disposal program meets its requirements. If we look at the debt reduction, a very pleasing proportion of this is only 5% now exposed on a net basis to the dollar and you can see in the FY '21 and FY '22 years it was hovering around the 41%. We've materially addressed that risk and it's only 5% now. We've reduced the debt from ZAR 5.2 billion to ZAR 4.6 billion and we have managed to do that through the reduction of ZAR 605 million. Now, you might ask well, we've had a rights issue of ZAR 960 million net of costs, why is the debt only reduced by ZAR 605 million? What this slide tells you is that we generated cash of ZAR 740 million, we released ZAR 905 million from working capital, we got the proceeds in for ZAR 960 million and then we got ZAR 236 million from our asset disposals. What had happened within the debt structure because of the weaker rand at the reporting date, the debt has gone up by ZAR 241 million and then the substantial numbers to the right of that is really the interest paid of ZAR 1.1 billion, and we've spent ZAR 353 million on CapEx and we've paid some tax. So we've got a base now that's set very well for FY '24 and hopefully there can be further reduction in the debt as we use proceeds from the disposals to reduce that. There's been judicious management of capital expenditure in the period. We have spent ZAR 353 million, ZAR 271 million in South Africa and ZAR 82 million in the rest of Africa. I would point out that the asset base is very well capitalized and is very well maintained. There's a very, very strong maintenance program within our asset base that does not compromise its productive ability. We have earmarked ZAR 350 million for the Line 2 in Springs, the beverage can 500 mil project. We have spent ZAR 86 million of that in the current year and there's another ZAR 264 million in FY '24 and that's to meet the growing pack format that we see in the market. Our CapEx range for the future, we say somewhere between ZAR 350 million to ZAR 400 million and we're embedded within that for the remaining metals businesses, approximately ZAR 300 million tapering down to about ZAR 200 million over the next couple of years. Our cash flow from operations is the number that we are pleased with this year at ZAR 1.6 billion. You'll see that, we've significantly improved our position there. From the financing activities, we have also released ZAR 313 million. That's a net number with ZAR 960 million from the rights issue. We've repaid ZAR 447 million of debt and then we've also had a reduction of certain of the liabilities, including the lease liabilities of ZAR 187 million and then treasury shares were also purchased. But our net cash in the period has increased by ZAR 401 million. If we unpack how we did the work, how we managed to release the working capital, ZAR 370 million released from inventory, ZAR 423 million from trade receivables and an additional funding from our creditors of ZAR 112 million and on the right hand side, you can see net working capital cycle improvement from 89 days to 74 days. There is further capacity to improve within that number. You'll see there's a dislocation between the inventory holding of 119 days and 97 days. There's a 22 day dislocation and our aim is to try and get our inventory holding completely funded by our trade payables. So we'll be working on that strongly in the next period. All right, thank you. Phil?

Thank you very much, Glenn. I found that to be a highly articulate presentation of our financial position. In respect of the outlook and future prospects, it would be naive to believe that it would be plain sailing. There will be sustained low growth in most geographies we operate in and significant hard currency liquidity constraints. We are somewhat at the behest of customers, however, we'll continue to strengthen our value proposition as our agility increases. Our competitors within the beverage category are acutely aware of our supply limitations on a growth pack format, which we will overcome in the New Year as we install new capacity. We are hopeful that the macroeconomic headwinds will ease as the world finds solutions to the current tensions. We remain concerned about South Africa and the well-reported dysfunctionality at multiple levels, which makes it increasingly difficult to do business. Corporates are battling to keep pace in the rapidly changing environment. Conglomerates and the notion that scale provides an advantage needs a serious rethink. Our most serious risk is volume loss in the short term, some of which has crystallized already. We are ever not dear in a set of headlights and responding with appropriate mitigation actions and we are building cultural grit. Our phase-out and scale down initiatives will succeed, so too our competitive status. Our position must enjoy eating some of our lunch in the short term. I'm exceptionally grateful to the management team that have elected to go the distance by supporting me on this journey. We now have an exceptional Board, which will continue to be strengthened as part of our brains trust and our collective effort. I said to you in March, Nampak cannot and will not fail. We have overcome what some thought was insurmountable. We aren't out of the woods, that would be overreaching. However, we have subjugated ourselves to the cause and we'll bring emotional and intellectual energy to work every day. So if poetry is the great idea, plumbing is how you get it done. We will defend our volume position as far as commercially viable. Disposals take center stage and we're making good progress. Our costs will continue to ratchet down. We will ramp-up our customer facing abilities and we will scale down and phase-out further plan with a concomitant result in agility. A performance ethos is not negotiable. It only takes one person to threaten the fabric of organizational culture. Self-doubt comes about by too much focus on the outcome as opposed to the process. We will execute with as much urgency and precision as possible. Our customers must want to do business with Nampak and we must be regarded as the most formidable and trustworthy partner, enabled by unconditional integrity in all that we do. And perhaps to end on a quote by C.S. Lewis, you can't go back and change the beginning, but you Nampak and have already commenced that journey. Thank you very much for those in attendance and those that are online for listening to us. And if there are any questions, we're happy to field them.

When you look at Nigeria and you see the losses are virtually equal or nearly equal to the market cap of the company, what's the point of even keeping Nigeria? Why not close it down, mothball it or sell it?

Your question is particularly pointed, thank you. There's certainly no reason to shut it down. The Nigerian business in itself, in naira, is a phenomenal business. In fact, it has performance metrics that way exceed South Africa from a productivity point of view. And it generates sustainable EBITDA. The reality is the other dynamics of the ForEx loss, which we've gone to great lengths to explain. The impairments have come about not through sluggish growth rates in our 4-year DCF. They come about because you've overpaid for these assets, period, hence the impairment. And then WACC rate influences as well that come into it. So we certainly won't mothball it. But I will tell you, it's #1 on our asset disposal list. And we're making, I think, pretty good progress in that respect. Do you want the mic?

Hi, Phil, Nick Wilson from News24. Just 2 questions. One relates to Nigeria. One of the analysts I spoke to this morning, Chris Logan, we were talking about obviously your plan to dispose of the Nigerian operations. Surely all this currency volatility and the problems there would put off any potential suitors for that business. And if you worried about that at all, I was hoping to ask you. And then secondly, you said your competitors must enjoy eating your lunch now. Have you got something planned to sort of come back in a big way? I was just, a bit more color to that.

Thank you very much for those 2 questions. In the first instance in Nigeria, it's dependent on who the prospective suitor is. If you're a person that believes in the long-term value that can be unlocked in Nigeria, which is irrefutable, by the way, you just have to have patience and the stomach to go the distance. So the likelihood of in-country investors probably takes precedence. If Nampak wasn't in the predicament, it was currently in, and almost disposals foist on you, you would regard that as a fantastic asset in the total portfolio. But that's just the predicament that we're having to deal with, and we've got to dry our eyes and move on. So I don't believe that we're going to have a problem in finding appropriate people to sell the asset to. In respect of the second question, and it really relates to our competitor -- our competitive status and stature, most of which I've tried to articulate is that we've gone through a massive reorganization process that arguably would take 3 years for another team, and we've managed to do that in a very short space of time, and the job's never done. It's ongoing. So we're positioning the company to be far more agile, if we're going to relegate this company, which we are, to a focused Metals business, then you have to have the concomitant structure and infrastructure, and resourcing that is appropriate to that. So we can only do this in a phased manner. As the assets go, we ratchet down again, but we've got a master plan to support what that end state will look like, but I wasn't going to wait till that comes to fruition, so we've had an aggressive go at that across the entire portfolio, notwithstanding that there are 13 assets up for sale. So I don't want to suggest any hubris or arrogance in my statement about enjoying eating our lunch, but we're in re-organization mode. The reality is we were flat-footed when it comes to installing new capacity, and I can understand why, but that was one of the first things that I triggered was the recommendation that we continue with that capital investment because there's a pack-size format that's growing exponentially in South Africa, and we simply can't supply another can, so understandably, our big customers, and we have enormous multinational and local customers that have continued to support us, that have in fact reserved capacity already with us on that new line before we commission it. I hope that attends to your question.

I'll just make one point on the foreign exchange. Embedded in that loss of a billion ran in Nigeria, there is a ZAR 330 million loss that results from monetary items being cash and debt that were on the balance sheet last year that got realized in the current year. So when you look at the loss in the current year, you need to go to slide, I think it's 39 and 40 within the pack, and just use that in your analysis to understand that there was ZAR 745 million with the monetary items last year. We've collected a lot of money in country and transferred it to the Isle of Man, and that has reduced to ZAR 262 million this year. So there's a significantly reduced risk in that business going forward.

Phil, it's Rowan Goeller from Chronux Research. First of all, well done on a pretty impressive and fast turnaround process. I've got 2 questions just to round it. First, your working capital, you've brought that down significantly. Have you changed the commercial terms with your customers, and so will the lower working capital base be sustained is the first question? And then secondly, at the last results I asked you about DivFood, which has turned around impressively. I must say you said it would. What have you done there, and how much more can you get out of it? I think you had spoken previously about getting to 6%, 7% operating margin. Can you get there in the short term in that business?

If I could start, Rowan, thanks for the questions on the DivFood side. It's an amalgam of elements that we've addressed within a well-articulated turnaround plan. In the first instance, we've managed to hold on to some of our raw material advantage. So that's not -- that takes some doing because you're just not passing on that benefit. So that's the first point, or point of unearthing the benefit. Secondly, we've reduced the cost significantly in that operation. Thirdly, they're already enjoying the benefit of a merged Bevcan and old DivFood operation, and that's spilling over. They've also formed part of the Section 189s, and they were quite a significant contributor to that. And we've put the A team. That business was starved and depleted of management capability. So by allowing this new management team to straddle both entities, we've pushed that management team in there, and they've got the operational efficiencies to a new level. We've actually, whilst we've lost volume in aggregate, some of it's not good volume. We've gained some good volume as an offset and at better margins, and that's helped to beneficiate our position on DivFood. If I said to you that, it's only the start, it is. One of the, let's call that getting busy. The getting smart piece is the continuation of using this combined management team. I've just sent a team to Silgan overseas. They were there for a week seeing 5 of world-class facilities that replicate our business, and they've brought those learning's home. Similarly, you have to have an exemplar for our Bevcan business, and if you can steal with pride, do that. So let's call that getting smart. The other very important piece that we've identified, and it's taken a tremendous amount of analysis, is a change to the manufacturing architecture, which is lumpy, unwieldy, and unsustainable. So we will be closing operations. In fact, we've announced the closure of 1 part of the business in our Mabini operation, and the likelihood of plant consolidation, some in F '24, some in F '25, will be materializing, and that gives you a complete step change in profitability. Then I think the first question had to do with the working capital. So you asked, did we change terms? We tightened up on terms, and I don't know, in Nampak's vulnerable state, it was allowed to drift, and I'm not taking a swipe at previous management. It was left unattended to. So I confronted that head on, and we got money in, and we also tightened up our days required, that we need to be settled at. Whilst we're managing a very delicate balance sheet, that's just 1 area that cannot be left unattended to. So it's a combination of those.

If I can squeeze one more question in. Jump forward 18 months to 2 years, and assume your sales process goes according to your plan. How much de-gearing can you do from the current balance sheet state?

It feels like I'll be dead by December, never in 2 years' time, Rowan. I don't know, if Glenn wants to actually commit to a range or a number to that extent at this stage. It all depends on the pace of our asset disposal plan. That's really at the heart of it. I'm less concerned about the operating cash flows that the businesses will generate as a contribution to our total free cash flow. But if we get Nigeria away, not only will we stop panting, we'll actually breathe without support at night. We also have another big asset as our number 2 priority, which is actually an amalgam of Zambia, Malawi, and our liquid cartons business. That's also very well advanced in the process. And then we have a few others, but those are the material ones that we will sell. And I'll state it publicly, whilst I said to shareholders that Angola forms part of our investment thesis going forward, I will not hesitate to undo that decision if that's required, to make for a sustainable Nampak. Ironically, for the first 2 months, Angola's doing very well. But this is the nature of doing business on the continent. I spent, if I could just digress, I spent time in the Coca-Cola system. And if you don't have a portfolio of assets, wherever you're operating, on the continent or Southeast Asia, it's kind of biblical. The one takes a slap and you say, well, thank goodness we've got a portfolio to buffer it. But more often than not, the parents' balance sheet is that which gives comfort to those investments in those very tricky markets, because very few of them actually wash their own face. So in this instance, we don't have the luxury going forward, given the aggressive disposal plan of a portfolio approach. So we can't afford to carry any bleeders, as I call them, in our business. So if they can't offer sustainable earnings, they're gone, period. We have a really meaty, successful, powerful business in South Africa that we can build off into the future.

Yes. There's a couple of questions from Ray Stein. He's asking you to categorically state, if another rights issue won't be required, and could you please unpack the ZAR 335 million refinancing advisory costs? His last question, has the ForEx situation in Nigeria improved or worsened after year end?

So the ForEx position, thank you for those questions, in Nigeria has improved after year end. I think it would be extremely inappropriate to go back to shareholders at this juncture. We have to convince them of the investment thesis to get us to this point. I think it's up to us. It's incumbent on management now to show them that the investment they made was worthwhile. I think they've been starved for a long time. So I certainly wouldn't put a new rights offer anywhere near our toolkit, if you will, for the future. The asset disposal plan is that, which will bring in the proceeds that we require, and bolstering of our operating cash flows out of our business. Glenn, the third question was the unpacking of the advisory costs, and I know you mentioned some ZAR 256 million, I think was the actual advisory cost.

So on the Slide 15 in your packs, you'll see that the ZAR 335 million is an ZAR 88 million proportion that was previously capitalized finance costs, which have had to be expensed in terms of IFRS 9 this year, because of the substantial modification of the facility. In terms of the cash costs in the year, it was ZAR 247 million.

I hope those answers suffice. Are there any more questions?

We have more. Paul Whitman, he's asking about the impact of the GZI deal. How does this potential deal impact your potential sale value of your Nigerian assets?

I suppose the jury's out. They've scaled up. We have sufficient surplus capacity. We're running at 50% of our installed capacity. So I guess it gives rise to increased competitiveness in the market. That's not necessarily a bad thing, but I don't believe it puts us at a disadvantage to their scaled-up business. They've still got to generate a certain amount of margin to stay alive.

And he's asking, is there any guidance on finance costs for FY '24?

Glenn?

Not at this stage, -- except to say that, there'll be ZAR 335 million list.

More questions from James Twyman. He's asking you to talk around your ability to offset ForEx costs in Nigeria and return to normal margins at least in 2024.

As a management team in Nigeria, and they are a superb management team, I honestly believe they're doing the best within their control. In the first instance, as I said, we go and price any movements to the parallel rate as the currency moves. You put yourself at a disadvantage in relative value to consumers in a very sensitive market, but that's the first thing that you have to do to recover. Then when and how you manage to gather dollars in the country and you're at the behest of the Central Bank of Nigeria is your second challenge. So we are on that every hour of the day and ensure that we extract at the most appropriate times.

And he's asking you to shed some light on your plans for that Nigerian operation?

Our plans for the Nigerian operation is to win back some volume in the short term, and an even bigger priority is to exit the business as soon as possible.

His last question, could you talk around your operating rate in Bevcan SA, and what is the outlook in terms of demand?

I'm not sure what is implied by the operating rate. If it's suggesting what our operating efficiencies are like in South Africa, we benchmark ourselves with the best in the world and we run a really good shop at both of our plants in fact. And the second part was what?

What is the outlook in terms of demand?

Demand. SA Inc. will be constrained, but the canned format seems to be growing in respect of consumer demand. The energy drink sector, which is also in that 500 mil format, is growing exponentially. And I would never have thought if you could add another brand and another brand that there was place for them, and I thought there'd be cannibalization, but the category is growing tremendously. The canned format also has significant benefits in its 100% recyclability compared to other substrates. It's also portable. It's convenient. And you have the graphics that you can express to differentiate the brands really well, and you'll see some of that that's coming to fruition on Castel Lite, as an example, on Heineken Silver, how people are using the canned format to ensure that it's contemporary and relevant to a certain part of the market. So I think it's going to be tough going. I think some of the competitors in South Africa will do better than others, and we've got to make sure that when we're in a position to gain market share, which is capacity-reliant, and we're really pushing hard to bring that forward, then we'll be back into a competitive position.

And a question from Nick Cregan. Is there too much capacity in the South African canning industry, which is eroding the pricing power of Nampak? If so, how much of this excess capacity is due to weak demand, and how much to overbuilding?

There's some surplus capacity on certain pack formats, but then again, there is too little capacity on other pack formats, and if you have to aggregate that, given a pretty pedestrian growth rate in South Africa, I think the amalgam of all of that would suggest to you that there's still available capacity in aggregate. I don't believe it's putting undue pressure on our pricing or our margins. We've got a proposition that we believe in, and we price it accordingly.

And Paul Whitburn. Any update on repatriating capital from Zimbabwe?

So I think we received a dividend this year from Zimbabwe as a first point to make, and then we've got, the government of Zimbabwe owes us around ZAR 70 million. I've been to the ministry personally in Zimbabwe. The money they owe us is gazetted. They simply need to pay us. So we have parties representing us in South Africa, then likes to refer to it almost, given the quantum thereof as an embedded rights offer. So we won't relent on that. It's our money. And it's owing to us. So we will continue using the parties that we are, and I'm hoping that we'll be successful going forward.

A question from Chris Logan. Thanks, Phil and team. Great job being done against an extremely tough environment. Can you please give some color on your second priority sale, the liquid packaging business? One would think this would be a good business to sell?

A good business to sell. I agree with you, Chris, and thank you for the word great. We don't hear that too often, so it is quite comforting. Lunch is on me when I'm next in Cape Town. So the Malawi and Zambian businesses are solid businesses. The liquid cartons business in South Africa is an exceptional business. And I did intimate that we have made relatively good progress on the disposal process. So I suppose you've got to wait and wait for the sends. I mean, when we're ready and we've taken something through our board and we have certainty, in these disposal processes, you walk this beautiful bride to the altar and the priest says, you may kiss the bride and she ends up kissing the best man. So you've got to be circumspect at best. You think the deal's done, but the deal's only done when the deal's done. And what I've learnt over many, many years, you do deals with people first and foremost. So with the help of Michael Dorn, who's spearheading all of this with our assistance, I think we've got the right team on it.

Yes, no more questions from the webcast.

Then all that's left for me to say is. Please, a little more patience. But we're getting there. Every day, we chip away at it, and we've made progress beyond my expectations. It's very difficult for some of those in our organization. You have to keep their morale levels up, knowing that their businesses are going to be sold, and you're trying to keep them in the game. There's attrition that happens as a consequence. So we've put the appropriate mechanisms in place in the form of incentives, certainty, moving of capabilities around the organization to ensure that we have a sustainable capability, which we now have in my management team that I've appointed to get the rest of the job done. We're not naive, though. There's always something coming at you. But that's why we're in business. We have to deflect. We have to manage these things appropriately as and when they present themselves. As long as you've got a bias for action in the business, there's no reason why we can't get the job done. Thank you so much for attending. To all those that were online, thank you very much. And we look forward to our one-on-one interactions with our shareholders over the next couple of days. Enjoy your week.