MPACT, the largest paper and plastics packaging company in southern Africa, suffered an impairment charge of R1.3 billion.     Antoine de Ras African News Agency (ANA)
MPACT, the largest paper and plastics packaging company in southern Africa, suffered an impairment charge of R1.3 billion. Antoine de Ras African News Agency (ANA)

Mpact swings to R884.5m loss on low demand and load shedding

By Sandile Mchunu Time of article published Mar 5, 2020

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DURBAN - Mpact swung from a profit into an R884.5million loss during the year to the end of December on low demand for its products and load shedding.

The largest paper and plastics packaging company in southern Africa also suffered an impairment charge of R1.3billion.

The group said deteriorating market conditions resulted in the impairment, which consisted of R549m of goodwill and R742m of plant and equipment raised against the Springs and Piet Retief paper mills, as well as the trays and films business.

Chief executive Bruce Strong said trading had been very challenging across most of their businesses in the past year. “The South African economy remained weak, and business and consumer confidence have been hit hard by load shedding and uncertainty in a number of areas,” Strong said. “This had a marked effect on our customers and particularly our consumer-facing businesses. Sales volumes were under pressure across most sectors.”

Last year, the group reported a profit of R327m.

Strong said despite the weak trading environment, the group managed to record underlying earnings before interest, tax, depreciation and amortisation from continuing operations of R1.28bn in line with last year. He said operating profit, however, declined by 3.7percent to R724m.

The group said revenue from continuing operations increased 5.1percent to R11.1bn, with higher average selling prices offsetting lower sales volumes. Underlying earnings per share fell 22.58percent to 192cents. It declared a total gross cash dividend of 60c a share from 70c last year.

Strong said Mpact committed R753.2m for the year to capital expenditure. He said the recent investments, such as the Felixton paper mill upgrade and the new corrugator in Port Elizabeth, contributed positively to the results.

“Our investment into shopper bags has been positive, with two additional paper bag formers installed in 2019,” he said. “The shopper bags are made from 100percent recycled paper produced at Mpact’s Felixton mill, providing a strong, sustainable substitute for plastic shopper bags.”

Strong emphasised that the group would slow down on spending money on capital expenditure as a result of low economic growth. He said there was still no indication of any meaningful improvement in the economy.

“The global oversupply of containerboard and cartonboard persists, while we expect the dynamics supporting recycled fibre availability to continue for the remainder of the year.

"We will prioritise cash preservation and mitigating the effects of the weak economy through cost savings, efficiency gains and product innovation,” he said.

Mpact shares rose 1.96percent to close at R13 on the JSE yesterday.

BUSINESS REPORT 

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