Ayanda Mdluli, Reuters and Bloomberg
Mpact delivered a four-fold increase in underlying earnings after it was spun out of Mondi Group, the packaging company said yesterday.
Underlying earnings a share for the year to December were up to R1.029 from 24.3c in 2010.
The increase in earnings was due primarily to lower financing costs and strong cash generation in the second half of the year. A maiden cash dividend of 40c a share was declared.
Mpact, which represented roughly 10 percent of Mondi’s operating profit, was listed separately in July last year and now has a market capitalisation of more than R2.4 billion.
It said its plastics business performed better than its paper unit in 2011, but the paper business continued to make up 73 percent of the company’s revenue.
“We expect margins in the paper business to remain under pressure as lower international paper prices and the threat of import substitution limit our ability to fully recover cost increases, especially energy, transport and labour,” the company warned.
Bruce Strong, the chief executive of Mpact, said customers were under pressure. Some of the key challenges experienced by the company in 2011 were low packaging sector growth and increases in cost pressures.
In addition, labour unrest in the middle of last year had a negative impact on operations and on the company’s customers. Mpact’s annual revenue increased by 7.5 percent to R6.28bn.
Strong said 2012 would be challenging for the packaging sector and he expected margins in the paper business to remain under pressure due to lower international paper prices, and the threat of import substitution limited the group’s ability to fully recover cost increases, especially energy, transport and labour
.
The stock climbed 3.3 percent to R15.50 on the JSE yesterday, the biggest gain since the company listed last year.