Mpact reports revenue surge to R4.8 billion

PAPER and plastics packaging manufacturer Mpact reported brisk business in the five months to May, with increased revenue of R4.8 billion, while underlying operating profit more than doubled to R240 million, as it looks to invest in several projects, including 10 megawatts of renewable energy over the next year.

In a business update and trading statement for the half year to June, the group said the 16 percent increase in revenue compared with the same period last year was partly due to the paper business benefiting from improved global containerboard prices, increased local sales and higher average prices.

It said the benefits of higher containerboard prices were partly offset by higher wastepaper costs, which have increased dramatically since the end of last year, along with a general increase in demand for and the prices of commodities.

Sales of plastic packaging products benefited from increased demand in most sectors, but, the group said, the benefit of increased sales was partially offset by significant increases in polymer prices.

It said net finance costs were projected to decrease 25 percent from R95m last year because of lower average net debt and interest rates, and the effective tax rate was estimated at 28 percent.

The group said revenue in the plastics business would increase nearly 20 percent compared to the prior period, with good growth across all businesses.

The group said it was investing to take advantage of the significant structural shifts in the global economy as it rebounds from the Covid-19 slump, re-orientates itself towards investing in green-growth and prioritise energy-saving goal standards.

“These shifts have increased demand for our range of products and seen both new and existing clients, as well as the financial markets, taking a keen interest in our circular economy business model,” it said.

The group said since the 2020 commercial launch of the “Freshpact” range of fresh produce paper trays and punnets, sales volume of these products have grown significantly. Other recent innovations were paper grape bags and paper courier bags.

“To ensure we are well positioned to take advantage of a sustained increase in customer demand across our business segments, the board has recently approved over R500m in investments to support growth and innovation, improve margins, and ensure the resilience and sustainability of our operations. Over the next 24 months, we are building new purpose-built facilities while investing in new technology, plants, equipment and solar power production that will improve efficiencies and expand our capacity to meet growing customer demand,” it said.

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.

Mpact said it was finalising a R200m debt facility to fund the projects.

It said cash generated from operating activities was expected to be offset by higher working capital, due to increased stockholdings of raw materials to ensure continuity of supply.

The group expected to release its unaudited interim results in August.