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Packaging group Mpact (MPT), formerly Mondi Packaging SA, which listed on the JSE in July after being stripped out of paper group Mondi (MND), on Thursday reported basic earnings per ordinary share for the year ended December 31 2011 of 54.9 cents while underlying earnings per ordinary share were 102.9 cents.

A maiden cash dividend of 40 cents per ordinary share was declared.

Revenue of R6.281 billion was in line with the comparable prior year period with higher average selling prices offset by lower volumes in the paper business and in Paperlink, the paper merchanting business, which was sold at the end of March 2011.

Underlying operating profit of R517 million was 6.4% up on the comparable prior year period.

“We turned in a solid 2011 performance against the backdrop of challenging economic and trading conditions,” said Bruce Strong, Mpact CEO.

The company said return on capital employed (ROCE) climbed to 13.8% in 2011 from 13.1% a year earlier.

“Capital restructuring prior to listing on the JSE on July 11 2011 as well as strong operating cash flows saw a substantial reduction in net debt, reducing gearing to 35% from 96% in the prior year,” Mpact said.

“In the year under review, special items include non-recurring costs amounting to R87.4 million relating to the listing and demerger from Mondi which are excluded from underlying profit before tax,” it noted.

Net finance costs of R291 million were lower than the comparable prior year period by 24.8%.

In the company's paper business, revenue was 3.8% higher at R4.573 billion.

While in its plastics business, revenue of R1.577 billion grew 20.4% compared to 2010, due to increased volumes and higher average selling prices.

Looking ahead, the company said it expected margins in the paper business to remain under pressure as lower international paper prices and the threat of import substitution limited its ability to fully recover cost increases, especially energy, transport and labour.

“Despite this, our strong market position in the paper business remains a key competitive advantage,” it added. - I-Net Bridge