Mpact benefits from strong local demand reports 5.2% rise in interim revenue

SOUTH AFRICA – Mpact, South Africa’s leading paper and plastics packaging business and recycler, has reported that its headline earnings per share grew by 31% to 142 cents while basic earnings per share climbed 28% to 138.9 cents in the six months ended 30 June 2022.

The improved results were achieved on the back of strong local demand for both containerboard and cartonboard as well as good growth in new product sales.

Higher selling prices implemented at the end of 2021 helped to mitigate sharply escalating input costs.

The group revenue for the six months increased by 5.2% to R5.7 billion (US$353m) compared to the prior period with sales volumes decreasing by 1%.

Despite a strong performance, the group experienced challenges during the six months, including problems at local ports, bad weather and ongoing global supply chain constraints.

Trading was mixed across the business, with good sales volume growth in the QSR, beverage and home delivery sectors, partly offset by declines in other FMCG sectors as well as fruit packaging.

Fruit packaging has been impacted by the uncertainty arising from the sanctions related to the Russia-Ukraine conflict, as fruit producers have delayed decisions on harvesting and packaging of some products until they are able to establish which markets to service and how.

Its underlying operating profit (EBIT) increased by 21.5% to R387.1 million (US$23.97m) mainly attributable to strong domestic demand in the Paper business, partly offset by lower sales volumes in the Plastics business, and higher input costs.

Paper and plastic businesses register rise in revenue

The Paper business’ revenue of R4.9 billion (US$303m) was 5.9% higher than the prior period R4.6 billion, with sales volumes decreasing by approximately 1% due to lower Baywhite sales.

In Paper Converting, consumer demand increased compared to the prior period, resulting in improved sales volumes in the industrial and QSR sectors.

Additionally, strong growth was experienced in new product sales, albeit off a low base, as a result of sustained demand in home delivery and courier paper bags and Freshpact punnets and trays.

This was partially offset by lower sales in the fruit sector as producers delayed orders as a result of supply chain and market uncertainties arising from port constraints in South Africa and sanctions against Russia.

Underlying operating profit of R457.6 million (US$28.3m) was up 31.8% as a result of improved trading.

Meanwhile, revenue in the Plastics business increased by 1.2% to R848.6 million (US$52.5m). Sales volumes declined by 6.4% as a result of lower sales in Bins and Crates operations, while FMCG operations were in line with the prior period and Preform and Closures operations were up marginally.

Production of bins and crates was lower than the prior period as a result of delays in the arrival of new equipment from overseas, and in part due to operational issues, impacting sales.

Underlying operating profit decreased to R3.5 million (US$216,000) due to lower sales volumes and the costs associated with the KZN floods of R11.6 million which are included in the current period results while the insurance claims are being finalized by the insurers.

Mpact is expected to continue to benefit from strong domestic containerboard and cartonboard demand, with all paper machines fully booked to the end of the current annual supply agreements, being end of September.

The Plastics division will benefit from the consolidation of the two preform and closures factories in Wadeville during Q3 and an improvement in the Bins and Crates business is anticipated.

The new plastic crate recycling facility in Brits and the development of the new Castleview factory are also expected to contribute more meaningfully during the second half of the year.

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