Nampak Plans Glass Factories in Africa's Most Populous Nations

Nampak Ltd., Africa’s biggest maker of beverage cans, has agreed with partners to build glass-bottle manufacturing plants to take advantage of growing demand for packaged consumer goods and bottled drinks in the two countries where a quarter of Africans live — Nigeria and Ethiopia.

The Johannesburg-based company has reached a preliminary agreement with a partner for a factory in Ethiopia and is now seeking financing for a project with a potential cost of $68 million, Chief Executive Officer Andre de Ruyter, 47, said in an interview at Bloomberg’s Johannesburg office last week. That will help supply drinks makers including brewer Heineken NV and soft drinks producer Coca-Cola Inc, he said. Nampak has also “made good progress” on a Nigerian factory, the CEO said.

“Africa is the story for us,” De Ruyter said. “People talk about Latin America, they talk about India, China or other emerging markets, but we think the opportunity that we’ve got in Africa is so big and this is what we know we can do well.” – Andre de Ruyter, CEO, Nampak

Consumer-goods companies such as U.S. retailer Wal-Mart Stores Inc and brewer SABMiller Plc are expanding in Africa to take advantage of economic growth and rising household incomes.

“There’s a youth bulge of people reaching drinking age” in Africa, De Ruyter said. Producing glass bottles and cans “makes a lot of sense.”

Nigeria, with a population of about 177 million, has 44 percent of its population under the age of 15 while 46 percent of Ethiopia’s 97 million people are below that age, according to U.S. Census Bureau data. That compares with 16 percent of the 403 million people who live in the euro area.

“Africa is the story for us,” De Ruyter said. “People talk about Latin America, they talk about India, China or other emerging markets, but we think the opportunity that we’ve got in Africa is so big and this is what we know we can do well.”

Nampak is expanding outside of South Africa to help reverse declining profit margins in its home market, where it’s cutting costs. The continent’s most-industrialized economy contracted in the second quarter of 2015 for the first time in a year, while consumer confidence dropped to a 14-year low in the same period.

Nampak gained 0.2 percent to 27.80 rand as of 2:22 p.m. in Johannesburg on Wednesday, paring the decline this year to 36 percent. That compares with a 1 percent gain on the FTSE/JSE Africa All-Share Index.

In South Africa, Nampak plans to cut its number of glass products to about 85 different types from 130 to reduce costs, according to De Ruyter, and is also seeking to reduce its food-can range by as much as 38 percent. It’s replacing older machines with more efficient models, the CEO said.

Nampak has signed a memorandum of understanding with a local partner in Nigeria, identified a factory site with access to natural gas and water and started a feasibility study, De Ruyter said. The plant in Africa’s biggest economy will cost as much as $100 million and will be completed in about three years.

The company also has plans for an Angola glass factory although it’s still “very early days,” according to the CEO.

Nampak will consider expanding its can production by doubling capacity in Nigeria and looking at a potential third can line in Angola, De Ruyter said.