DURBAN - MPACT’S share price rose by more than 9 percent on the JSE yesterday after the paper and plastics packaging company said it managed to cut its debt by R900 million for the year to end December.
The share later closed 9.15 percent up at R17.90.
In a trading update, the group said its net debt fell to R1.4 billion during the reporting period, down from R2.3bn compared to a year earlier. This comes after it generated a strong cash flow from operations of R1.9bn, up from R986m last year.
Mpact, which was unbundled from Mondi and listed separately in 2011, reported an increase in earnings despite losing 50 production days in its Springs paper mill during the period, which had a negative impact on its gross profit.
“During the year, the Springs paper mill lost more than 50 production days due to the catastrophic failure of a municipal sub-station in Ekurhuleni, which resulted in a loss of gross profit for the group of approximately R91m and other related direct costs of R9m,” the group said.
However, to mitigate the loss Mpact submitted an insurance claim and an interim settlement of R35m had been approved by the insurers, of which the net proceeds of R25m had been included in the results as sundry income.
The balance of the claim had not yet been settled or accounted for.
Its gross profit is expected to decrease by roughly 5 percent, with the gross margin decreasing around 1.8 percentage points compared to the prior year.
“The decline in gross margin is mainly attributable to lower average recycled container board prices during the first half of the year due to a higher proportion of export and rolled pulp sales,” the group said.
However, Mpact saw the gross margin improving in the second half as a result of increased demand for container board in the domestic market and recovery in businesses that were affected by strict Covid-19 lockdown levels during the first half.
Mpact also informed its shareholders that it expected its headline earnings per share from continuing operations to increase by between 2.3 percent and 10.3 percent, to be between 190 cents a share and 205c, up from 185.8c reported last year.
Its earnings per share (Eps) from continuing operations were expected to increase by more than 100 percent, to be between 180c and 195c, improving from a loss of 443.7c reported a year earlier while its underlying Eps is expected to increase by between 1.7 percent and 9.5 percent, to be between 195c and 210c, up from last year’s 191.8c.
Mpact expects to release its full year results around March 5.
BUSINESS REPORT