Phil Roux’s two years as Nampak CEO sound more like a 10-year marathon than a shortish stint spent righting what was once one of South Africa’s blue-chip darlings.
After this week announcing his decision to stand down and hand over to Nampak insider Andrew Hood in October, Roux tells Currency: “I haven’t in my 35 years of working had to do so much concurrently – but we didn’t have a choice.”
Known as a fixer, the 60-year-old has spent time righting businesses, from Adcorp to Pioneer. “I’ve gone into companies that were strong cash generators but [not] fully optimised,” he says. “But this was completely different as an assignment because [Nampak] was finished, and it wasn’t a small firm.”
Given where Nampak is now – trading at a profit, with a share price that has rallied 150% in the past year – it may be tempting to see this as a slight exaggeration. But, says Opportune Investments’ Chris Logan: “It was one minute to midnight, and it wasn’t just a turnaround [story]; the culture was rotten to the core. They were always ripping big bonuses out when they shouldn’t have, from the top to the bottom – Phil had a huge amount to do and that was just culture. Then there was the operational mess and the banks …”
Indeed, when Roux took on the CEO position, after having initially been brought in as a non-executive director by activist shareholder and now Nampak chair André van der Veen, Nampak had just posted a R2.4bn loss for the half-year to March 2023. That was almost five times the value of its market cap on the JSE at that point. He had to push through a deeply unpopular – and expensive – rights offer to get the packaging firm out of the gigantic R6bn debt hole into which it had fallen.
“We had 16 lenders screaming for their money otherwise they were going to shut us down,” says Roux, who is diplomatic about the rapaciousness showed to Nampak by its banks; of the R1bn ultimately raised from shareholders, R335m promptly went to the bankers as fees.
Clearly, getting its capital structure right was the most pressing issue, but Roux had to perform some brutal cost surgery that included 10 asset sales, including of the company’s once-prized investment in Nigeria. In the midst of it all the company was hit with a massive cyberattack, which downed its IT systems for two months last year.
Overcoming apathy
Asked why the previous top 40 stalwart endured such a spectacular fall from grace, Roux says: “I’ve avoided commenting on Nampak of the past, but there’s no doubt that there was a period in its history where it was this fat-cat conglomerate where there was limited competition and apathy crept in. But the heart of Nampak’s problems was not wastefulness – it was the capital allocation choices that the board and executive team made in a moment in time that nearly sank this company.”
Those choices included major investments in Nigeria, Angola and Europe, as well as a massive glass plant in South Africa.
Given how close to death Nampak was, not all the asset sales the company was forced into over the past two years have been ideal. “Some of the assets we got rid of could potentially portend great value, but we never had the luxury of time,” says Roux.
What was key, however, was to sell the Nigerian business – which Roux has now done, and which is one of the reasons he’s decided it’s time to leave.
“I worked on that transaction for 14 months alongside our CFO and company secretary and it was a 24/7 job. And because it constituted almost 50% of the proceeds required against our disposal facility the transaction had to happen.”
In the end Nampak walked away with almost R100m more than it was asked to deliver (it sold the business for $68.5m), which is one reason the company’s leverage ratios now look that much healthier.
“Getting on with it” seems to be Roux’s motto. “[The quicker] you get it done then the quicker you settle an organisation. Remember, culturally, you’re trying to change the performance anatomy and these organisations have built up antibodies over such a long time you’ve got to break it,” he says.
Key to Nampak’s culture change was forcing the company’s managers to behave like owners. “I detest waste,” says Roux. “You don’t get to just spend money – it’s not yours unless we can account for it with absolute integrity.”
While he jokes that he’s not been clinically diagnosed, Roux reveals that “I’m obsessive compulsive when it comes to these sorts of things. When I speak to my team, I always say: ‘If you’re going to come and present something to me just ask yourself one question: have you plated up the best possible work?’ And I’m not going to be cross if you say no – rather go away and improve upon it. But that takes time to embed in an organisation.”
Certainly, Nampak’s finances are in radically different shape. While the company is in a closed period ahead of the release of its half-year results to end-March, for the full year ended September 2024 it made an operating profit of R1.7bn from a R1bn loss the year before, while finance costs were 24% lower.
“We have more than trebled the margins and our gearing is on a downward glide path that’s really attractive, and should become more attractive to shareholders,” says Roux.
Most of its biggest customers have also stuck around – which may not have been the case in its darkest moments two years ago. “It shows the residual equity that was in the Nampak brand. Though there were one or two that kicked us when we were in the gutter, for the most part they stayed and that’s reflected in our top-line growth,” Roux says.
He also credits incoming CEO Hood for an “incredible” performance in the company’s diversified products portfolio, which produces tinplate food cans for the food sector, as well as aerosols and shoe-polish cans. “The business didn’t make a profit for eight years and now it’s got a double-digit margin,” he says.
Runway to grow
Rowan Goeller, an analyst at Chronux Research says Roux’s departure isn’t a shock. “He was never likely to stay once the restructuring was complete – so a handover to someone more focused on the day-to-day operational and strategic issues comes as no surprise.”
Logan says while Roux is a “unique” individual, “he wouldn’t have been able to do what he did without that that board” under Van der Veen as chair, and Adrian Zetler at A2 Investment Partners, the firm that orchestrated the cleanup at Nampak. It’s a sentiment Roux openly shares, too, and he remains invested in Nampak, for now.
“I can’t see how we can’t say this is a stable organisation,” he says. “Its gearing is on the way down, it’s not going to be reckless with capex, its margins have opened up, customers have enormous renewed confidence. And it holds a market share in beverages of over 60% and big market shares in the food [sector].”
The most important aspect of Nampak is that it has “runway” to grow, even in South Africa’s limp economy.
“People don’t emphasise growth enough,” says Roux. “When you buy a business, and you’re running the discounted cash flows, and it shows you all the lovely metrics and the right rate of return and a year later you come back and do a review and you ask yourself what went wrong – it’s because you got your top-line growth assumptions wrong.”
Goeller believes the outlook is positive for Nampak, arguing that it is “well positioned” to benefit from a beverage-can market “that is growing fast in South Africa and gaining market share as a packaging product”.
Of course, this could be so much better if South Africa’s politicians actually pursued a pro-growth strategy.
“We do ourselves such a disservice. We have no policy certainty, we have people who put their foot in their mouths every two seconds. We’re doing our best to alienate ourselves. People are sitting on cash because they remain too scared to invest,” says Roux, who remains worried about SA Inc. “Go and have a look at the numbers coming out of companies – there are a lot of poor people struggling. Everything is geared to a value proposition. Every ad you see is ‘buy one, get one free’.”
Still, he’s sticking around and wouldn’t mind taking a crack at something else in the FMCG sector – his area of expertise.
“When you turn 60 it’s quite a turning point because you look in the mirror and you look 60 but you don’t feel it. If I could, I’d wave a wand and have a role where I take a decent firm with significant upside potential as opposed to a company that’s broken. My last two stints have been with companies that were really broken. Something semi-normal would be quite nice.”
Top image: Phil Roux. Picture: supplied.
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