Mpact plans to build earnings by innovating in fast-growing sectors

Mpact’s group revenue increased 7.1% to R12.4bn mainly due to higher average selling prices. File photo

Mpact’s group revenue increased 7.1% to R12.4bn mainly due to higher average selling prices. File photo

Published Mar 8, 2023


Mpact, which yesterday reported a strong financial performance in the year to December 31, will focus on organic projects to extend its products and services, and generate sustainable energy, CEO Bruce Strong said yesterday.

“We’re pleased with our performance. It hasn’t been a very easy year, but we never lost sight of where we are heading,” he said in a telephone interview.

The share price of the leading paper and plastics packaging business and recycler, gained 2.57% by yesterday afternoon to R30.26 on the JSE, which is about midway between its 12 month high and 12 month low.

Apart from robust operations through the past year, investment in solar and backup power increased, while research and product innovation brought the group closer to its customers, he said.

Mpact recently announced a R1.2 billion investment to upgrade Mkhondo Paper Mill in Mpumalanga, to meet growing virgin containerboard demand for fresh produce packaging, driven by strong long-term growth prospects in the South African export fruit sector.

Strong said the group had good project management skills for this investment, as it followed others implemented by the group including Mpact Plastic Containers’ new Castleview production and Brits recycling facilities, Mpact Corrugated’s new customer service centre in Limpopo, Mpact Recycling’s new purpose-built facility in KwaZulu-Natal and the expansion of solar photovoltaic (PV) generation capacity.

Gearing was comfortable at around 32%, long-term debt had been rescheduled at lower cost and pushed out to three and four years, while a new R1.45bn lending facility was recently granted to provide facilities should any unexpected headwinds be encountered in the group.

The group was experiencing stronger-than-gross domestic product rising demand for packaging in the fruit export, convenience shopping, recycling and waste management sectors, and these sectors also had good sustainable longer term potential, said Strong.

Mpact’s paper mills had demand curtailment agreements with Eskom rather than being subject to load- shedding schedules, and were not yet materially affected by load shedding.

Nevertheless 5.3MW of solar PV was rolled out at a further five plants in 2022, bringing the total to 9.4MW at 10 operating sites. There were plans for a further 6.7MW at two sites in 2023. An additional 10.6MW was in the pipeline for another two sites, pending approval.

Several of the group’s converting operations had back-up generators and we are evaluating the electrical infrastructure requirements to have generators installed where practical at other sites to increase operational resilience.

Group revenue increased 7.1% to R12.4bn mainly due to higher average selling prices. Excluding revenue of R72m and volumes relating to the Baywhite distribution agreement with Mondi that terminated at the end of December 2021, group revenue increased 15.2% and sales volumes by 6.3%.

Underlying earnings a share increased by 26.7% to 456 cents.

Strong domestic containerboard demand and reduced Baywhite sales led to a favourable sales mix variance compared to the prior year.

The Felixton Paper mill achieved record production of 210 646 tons, up 9% on 2021. The result exceeds the 2017 rebuild project target capacity..

Paper converting’s sales volumes increased due to growth in the industrial and quick- service restaurant sectors, with the latter demand possibly supported by load shedding as more customers ordered in food.

Revenue in the Plastics business was up 9.7% to R2bn. Average prices increased 9.9% and volumes were in line with the prior year with an increase in Bins and Crates offset by a decline in the FMCG (fast-moving consumer goods) business due to lower demand, as well as the seven days of downtime at the FMCG Pinetown factory attributable to the floods in KwaZulu-Natal.

Preforms and closure volumes remained flat. The consolidation of the two preforms and closures plants in Wadeville was complete and related cost savings were being realised.

The Bins and Crates Castleview project was delayed due to late delivery of new equipment, but five machines were installed in the year bringing the total to six at year-end. A further three would be installed in the first half of 2023.