Nampak has announced that it plans to expand its packaging operations beyond the low growth South African domestic market and will initially drive its future growth by concentrating on its European operations, according to a report in Business Day.
Following its merger with rival South African packaging company, Malbak, earlier this year, analysts are now tipping the company as a reliable prospect for future growth, endorsing its plans for further overseas expansion.
Earlier this year the company announced that it was investing €10 million to expand its manufacturing operations in both South Africa and Europe.
The company has said that, depending on the success of its operations in Europe, it would then like to expand its operations in the US market.
Allan Gray analyst Abdulazeez Davids told Business Day that the foundation had now been laid for delivering significant earnings growth over the next few years.
Davids added that Nampak was the lowest-cost producer in some of its market segments, and with the significantly weaker South African currency it was now positioned as one of the lowest-cost packaging companies globally.
The move to break into the European market is considered to be a wise one because Nampak has also bought European assets with domestic assets, further enhancing its foundations for expansion in that market.
Davids added that in the South African market the synergies from the recent merger were good and that Nampak was now doing well in the export market.
Over the past twenty years Nampak has made repeated efforts to streamline its South African operations in an effort to reduce costs and increase productivity. This has left its domestic operations in a healthy state, a factor that makes its products all the more competitive in the cut-throat export market.