DURBAN – Listed paper and plastics packaging company Mpact rose more than 14 percent in early trade on the JSE on Wednesday after the group announced that it expected a surge of between 22.1 and 28.1 percent in underlying earnings per share (eps) for the year to the end of December.  

Mpact said in a trading statement to shareholders that the underlying eps would increase between 203 cents and 213c a share from 166.3c recorded during the corresponding period last year. 

The group attributed the improvement to favourable conditions in its paper business.

However, it warned that this would be partially offset by a decline in the plastics business. 

The company endured a protracted strike last year as members of the National Union of Metalworkers of SA (Numsa) demanded a 15 percent wage increase and a reversal of the decision to pay workers R20 an hour instead of R40.

In the six months to the end of June, the paper business grew revenue by 5.3 percent, due to higher average selling prices, while revenue from the plastics unit fell 5.3 percent, which was due to subdued sales volumes.

The plastics converting business softened 11.7 percent, largely because of declines in preforms, crates and jumbo bins.

Mpact was spun off from Mondi in 2011 and listed separately on the JSE.

In August, the group said that it would spend R521 million in investments in the next 12 months to drive the paper business.

It said that the paper business grew revenue by 5.3 percent, due to higher average selling prices during the period under review, while revenue from the plastics unit decreased 5.3 percent to R1.1 billion, due to subdued sales volumes.

Yesterday, Mpact said that it had expected its earnings before interest, tax and special items (ebit) to show an increase of 44 to 50 percent, up from R457m reported a year ago. 

However, the group said that it would achieve a marginal increase of 5 percent in revenue when compared to last year’s R10.1bn. 

Mpact said that it had excluded an amount of R53m from underlying ebit, and recorded it under special items, which related mainly to an impairment charge and restructuring costs. 

“Underlying earnings excludes special items, which are defined as aspects of financial performance that Mpact believes should be separately disclosed to assist in the understanding of the underlying business performance,” the group said.

Mpact said the group’s earnings per share would increase between 11 and 17.2 percent to between 180c and 190c from last year’s 162.1c, while headline earnings per share would rise between 190c and 200c from 164.5c. 

The group said that it would release its audited results for the year next month.

Mpact shares closed 12.24 percent higher at R23.85 on the JSE on Tuesday.

BUSINESS REPORT