Mpact’s paper recycling plant in Springs. Photo: Antoine de Ras
Mpact’s paper recycling plant in Springs. Photo: Antoine de Ras

Mpact shares surge 5% after reported hike in its earnings

By Sandile Mchunu Time of article published Mar 14, 2019

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JOHANNESBURG - Listed paper and plastics packaging company Mpact surged more than 5percent on the JSE yesterday after the group reported an increase in earnings for the year to end December.

The group said it recorded a 47percent increase in underlying operating profit to R672.4million, boosted by the contribution from its paper business.

It said underlying operating profit in the paper business inched up 56.7percent to R694.4m as a result of lower recovered paper costs and higher global containerboard prices.

The group said the increase was, however, offset by a decline in its plastics operations.

Mpact, which was spun off international packaging and paper giant Mondi and listed separately in 2011, said that the plastics division reported a 29percent decline in underlying operating profit to R49.5m, negatively impacted by a 10.6percent decline in sales volumes in the plastics converting business.

Chief executive Bruce Strong said the division experienced a subdued demand for the product in the country during the period.

“Sales volumes in the plastics converting business were down 10.6percent as a result of backward integration by customers and the effects of the sugar tax on preform sales,” Strong said. “In addition, crate and jumbo bin sales were lower than the prior year due to subdued demand attributable in part to the drought.”

The market received the news of the change in fortunes positively, with the group stock climbing 0.55percent yesterday to close at R23.63 from R23.50 on Tuesday.

Mpact said group revenue shot up 4.9percent to R10.6billion, benefiting from the Felixton mill upgrade, lower recovered paper prices and increased corrugated packaging sales.

It said underlying earnings per share rose 25percent to 208cents a share from 166.3c last year.

The group said its net debt narrowed 5.3percent to R2.1bn, mainly as a result of lower capital expenditure and tax paid during the year, offset by working capital outflows.

The group declared a final gross cash dividend of 55c for the year.


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