A CEO couldn’t hope for a more inglorious exit than leaving a company with a 51% drop in earnings, a R601m write-off of goodwill and a shrinking share of its market.

Though this might seem a tricky subject to bring up, Nampak CEO John Bortolan proved willing in an FM interview to tackle the gorilla in the corner head-on, rather than skirt around it. “Ideally, I would have liked to have left Nampak with [good] earnings. But realistically, I know the challenges we’ve had,” he says.

Maybe, but Nampak’s results for the year to August make Africa’s largest packaging firm look more like a bumbling clown than a nimble soldier bracing for a tough market. Besides the write-off and a messy R250m settlement with the taxman, Nampak’s bread-and-butter trading income fell 13,7% to R1,5bn. Its trading margin dropped to 8,6% from 10,8%, while its loans and borrowings more than tripled from R526m to R1,7bn.

One problem for packaging companies was the steep rise in the price of polymers, which are needed to make plastic and are supplied mainly by Sasol, using a punishing import-parity pricing formula.

This was also evident in Astrapak’s results for the six months to August, where profit fell from R78m to R21m, which it said was due to “the relentless increase in polymer prices”.

Polymers are now selling for more than £1000/t. At the beginning of last year, the price was £800/t.

Bortolan says Nampak just couldn’t recover the higher cost of raw materials by hiking prices. “If we had been able to charge just 2% more on our selling price, then this would have turned that 13,7% decline in trading income into an 8% increase.” That would be a big swing, but packaging companies have lost their pricing power: retailers are squeezing branding companies, which are squeezing the weakest link in the chain: the packaging companies.

The 60-year-old Bortolan will leave in March after 29 years with Nampak, and will be replaced by Andrew Marshall — the current CEO of Oceana — who worked at Nampak a decade ago.

The lack of energy at Nampak has been obvious, which makes it all the more curious that it spurned an overture from one of the best industrial operators in the business. Bidvest, which owns about 5% of Nampak, launched an offer to buy 25% of the company.

Given Bidvest’s Brian Joffe’s reputation for sparking life into even the most sluggish sectors, it was the first time in years shareholders saw hope.

But Nampak’s board put out an announcement implying it was a bad offer. Saying it valued the company at a 8,9% discount to its current value, Nampak said it would give Bidvest a “blocking stake”, and that it had a plan to fix the business. Joffe then withdrew the offer.

Which is a pity. Nampak’s board seems to be a comfy club resistant to change: until recently, six of its 10 nonexecutive directors had been there for more than 10 years each.

Bortolan’s departure, and the appointment of Roy Andersen (chairman of Murray & Roberts and Sanlam), and Phinda Madi (who sits on the boards of Illovo Sugar and Spar) are welcome new blood.

But it may not be enough.

For years, the Public Investment Corp (PIC) and asset manager Fraters have pointed to Nampak’s poor governance, with few truly independent directors able to look after the interests of minority shareholders. Chairman Trevor Evans is the chief culprit. Having served on the board since 1990, he stepped down as executive chairman in 2003 to become a “nonexecutive”. Despite his recent role as an executive and his board role for nearly two decades, Evans describes himself as an “independent director” — a claim the PIC says isn’t true.

At the last shareholders’ meeting, 15% of shareholders voted against Evans’s reappointment. This appears small but in fact it is a far cry from most AGMs, where shareholders simply rubber-stamp the re-election of directors.

Bortolan defends Evans, saying “there must be some experience. He’ll make the right decision for himself and Nampak when the time is right.”

Evans told the FM: “I certainly don’t intend being there till I’m 70, but I’ll be there as long as the board needs me.” He says he intends to help Marshall “settle down” as CEO, before he casts around for someone to succeed him as chairman.

So why is it that on his watch Nampak has looked like a company singularly short of good ideas and dynamism?

“Around the world, packaging is a tough space to operate in. Yes, new ideas were required, but it’s not the board running the day-to-day business, it’s the CEO. That’s where you look for new ideas,” he says.

Evans says Nampak’s new plan, which entails identifying underperforming operations and selling them, shows there is “fresh thinking”.

But during Evans’s reign, Nampak has slipped from favour, shedding market share to Astrapak.

Though it started small, Astrapak’s share price has climbed 256% this decade to R6,31. Nampak’s stock has dropped 29% to R13 in that time.

This year, however, Astrapak and Nampak have both taken a hammering. Since January, Nampak has fallen 39%, while Astrapak’s stock has shed 36%.

Of the six stockbrokers who cover Nampak, none rate it a “buy”, two say investors should sell, and four rate it a “hold”. In contrast, the two analysts who cover Astrapak advise investors to hold the share.

Says one broker, who didn’t want to be named: “We expect Nampak’s earnings to be flat for the next two years, so we think the stock is fully priced. But at least with Nampak you know what you’re getting, and there isn’t much risk to the forecast.” At least this is some upside for an otherwise grim forecast.

On average, the analysts believe Nampak’s shares could rise to R13,40 — marginally above its current R13, and little reward when there are so many other bargains out there.

Packaging companies clearly aren’t the belle of the ball at the moment, but Nampak will need to do more to suggest it’s a better punt than Astrapak.

Packaging is a troubled industry, and with little prospect of Bidvest riding to the rescue anytime soon and a board blighted by directors who have overstayed their welcome, Nampak isn’t exactly a shining beacon.