Mpact would spend R765 million to upgrade and expand its largest operational plant, the Felixton paper mill in Empangeni in KwaZulu-Natal, the packaging producer announced yesterday.
The project would add capacity at the largest local manufacturer of packaging products that range from corrugated cardboard and recycled cartons to plastic containers, which posted strong results for the 12 months to December last year.
Basic underlying earnings a share increased by 22.2 percent to R2.335, Mpact reported, on the back of a 12.9 percent rise in revenue to R7.7 billion, while underlying operating profit gained 12 percent to R654.8m.
The solid performance was attributed to strong packaging demand from the fruit sector, more stringent cost controls and lower finance costs.
The underrecovery of raw material price increases, especially in the plastic division, led to the operating profit margin declining to 8.5 percent from 8.6 percent last year.
Revenue in the paper business rose by 10.5 percent to R5.6bn, while the plastic division increased revenue by 19.4 percent to R2.1bn.
Speaking on the Felixton paper mill investment yesterday, chief executive Bruce Strong said the project would enhance the company’s product offering and improve its environmental footprint.
The Felixton upgrade would be one of the biggest focuses of Mpact in the year ahead and would be completed over three years, Strong said.
He said the Felixton plant had been one of its most successful and profitable businesses and was last upgraded in 2008.
Capacity at the factory, which was built in 1953, will be increased by 60 000 tons to 215 000 tons a year.
The project will be implemented in two phases. The first phase will cost R155m and will bring an additional 20 000 tons of capacity online. A further 40 000 tons of capacity will come online in the second half of 2017.
Mpact said about 600 construction jobs would be created during the upgrade.
On completion, the mill would use only recycled fibre in the manufacturing process and produce advanced lightweight packaging material, in line with demand trends in the industry.
The project would be funded from debt facilities and cash flow from operations.
Mpact closed 0.74 percent up at R27.20 yesterday, in line with the JSE’s general industrials index. – Nompumelelo Magwaza