Mpact sees record cash flows, cuts debt by 38.6%
DURBAN - MPACT’s share price surged to close more than 9 percent higher on the JSE on Friday to R19.92 after the group reported record cash flows from operations in its annual results and cut its debt by 38.6 percent.
The largest paper and plastics packaging business and recyclers in southern Africa generated cash flows from operations of R1.9 billion for the year to end December, up from R986 million compared to last year while it reduced its net debt to R1.4bn compared to R2.3bn a year earlier, resulting in gearing declining to 26.6 percent compared to 38.2 percent last year.
Mpact said its business benefited from a strong recovery in the second half of the financial year as the Covid-19 related restrictions began to ease and the oversupply of recycled containerboard reduced.
Mpact responded by reducing costs in order to conserve cash in response to the threat posed by the Covid-19 outbreak during the period.
Revenue was marginally up by 0.2 percent to R11.10bn and headline earnings per share increased 5.5 percent to 196.1 cents a share while underlying basic earnings per share increased by 4.6 percent to 200.6c.
The group opted not to declare a full-year dividend after it retained R345m to shareholders following a share repurchase programme it embarked on during the year.
Chief executive Bruce Strong said Mpact delivered a solid performance in a challenging year.
“The effective response to Covid-19 at all our operations was exceptional. By implementing our proven strategy of securing leading market positions and focusing on customers and performance, we also delivered a strong financial performance with record cash flows from operations of R1.9bn and a reduction in net debt to R1.4bn,” Strong said. The group operates paper and plastics segments.
In the paper business, revenue of R8.7bn was marginally lower compared to last year and external sales volumes decreased by 3.3 percent with a decline in paper converting and recycling partly offset by an increase in containerboard exports.
The segment’s underlying operating profit declined to R578m, due to lower containerboard margins, the electricity supply interruptions at the Springs paper mill and the effects of lockdown in the paper converting business.
The plastics revenue increased by 3.5 percent to R2.5bn (2019: R2.4bn) and overall volumes decreased 2.7 percent while underlying operating profit increased by 44 percent to R119m, with most businesses reporting good improvements, especially in the second half of the year.
Looking ahead, Strong said Mpact had a positive start to the 2021 financial year and was well positioned despite a weak economy.
“There are indications of good fruit crops and a gradual recovery in the Fast-moving Consumer Goods and quick service restaurant sectors. Mpact is also expected to benefit from an improved global outlook for containerboard and cartonboard.
“Working capital management will remain a key focus area, but it is anticipated that working capital levels will increase in the current period to ensure continuity of supply,” he said.