SOUTH AFRICA – Mpact, one of the largest paper and plastics packaging business and recycler in Southern Africa, has reported a 16.3% rise in revenue to R5.9 billion (US$403m) in the six months ended June 2021.

Its underlying earnings per share were up sharply to 121 cents from 9c in the same period last year and Headline earnings a share increased by 112.1c to 120.5c.

Cash generated from operating activities during the six months was R592 million (US$S40.45m), after a working capital outflow of R11 million (750,000).

The cash generated from operating activities more than offset capital expenditure cash flows of R250 million (US$17m), payment of interest of R70 million (US$4.78m) and shares repurchased of R257 million (US$17.5m).

Strong cash flow resulted in debt decreasing to R1.47 billion (US$100.45m) from R1.9billion (US$129m), despite a R257m (US$17.56m) share buyback in January – the buyback represented a substantial return of funds to shareholders and reduced the shares in issue by 14.5 percent.

“Mpact continues to show tremendous resilience, firmly anchored in our purpose of making a difference, providing our customers with sustainable packaging and giving effect to the circular economy through our integrated business model.

“This is demonstrated by the pleasing financial results for the first half of the year announced,” said Mpact’s Chief executive Bruce Strong.

During the period under review, the packaging maker benefit from robust performance in both the plastics and paper businesses.

Paper unit attains double digit growth in earnings

The paper segment registered a 15.8% growth in revenue to R4.6 billion (US$314m) with sales volumes increasing by 12.7%.

The unit benefited from strong local containerboard demand during the period, improved production performance and a favourable product mix due to low margin rolled pulp not being produced nor sold in the current period.

Also, the global containerboard prices were favourable and the recovery in the industrial and Quick Service Restaurant sectors and the continued growth in the agricultural sector benefited the Paper Converting business.

Its underlying operating profit of R347.1 million (US$23.7m) was up 88.6%, due to improved trading and operational efficiencies.

Plastic segment attains nearly quarter growth in gross profit

Looking at the plastics business, revenue increased by 18.3% to R1.3 billion (US$88.8m) with a strong recovery in sales volumes.

Gross profit increased by 23% due to improved sales and a stock write-down in the prior comparable period which was not repeated.

Plastics showed a significant improvement in profitability, with underlying operating profit increasing to R34.6 million (US$2.36m) from a loss in the prior period of R17.7 million (US$1.21m) due to good improvements in most businesses.

Mpact earmarks US$34m investment

Robust demand experienced in the first half is expected to continue across most businesses but may be partially offset by the recent unrest experienced in KwaZulu-Natal (KZN) and parts of Gauteng as well as supply chain constraints across most sectors.

However, margins are expected to improve as raw material cost increases are recovered through increases in selling price.

To ensure continuity of growth, the company plans to spend R500m (US$34m) on new capacity.

The project capital expenditure will be channelled towards building a new purpose-built facility, while investing in new technology, plants, equipment and solar power production that will improve efficiencies and expand its capacity.

Specific growth projects include Mpact Plastic Containers’ (MPC) establishment of two new operating sites: a food-approved factory in Gauteng to grow its injection-moulded bins and crates product offering, and a facility in Brits that will house MPC’s recycling operation and increase its recycling capacity by more than 100 percent.

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