Paper and plastics packaging producer Mpact delivered a strong efficiency in the half-year ended 30 June 2022, on the again of stable native demand for each containerboard and cartonboard in addition to good progress in new product gross sales.
The group reported a 21.5% enhance in working revenue to R387 million (2021: R319 million), primarily supported by its paper enterprise and better promoting costs applied on the finish of 2021 to curb rising enter prices.
Headline earnings per share elevated 31.1% to 142 cents (June 2021: 108.3 cents) whereas primary earnings per share climbed 28% to 138.9 cents (2021: 108.5 cents).
Revenue rose 5.2% to R5.7 billion in comparison with the prior interval.
Mpact says its outcomes might have been higher, however have been partly affected by decrease gross sales volumes in the plastics enterprise.
“Trading was mixed across the rest of the business, with good sales volume growth in the [quick service restaurant] QSR, beverage and home delivery sectors, partly offset by declines in other [fast-moving consumer goods] FMCG sectors as well as fruit packaging,” Mpact CEO Bruce Strong mentioned.
“Fruit packaging has been impacted by the uncertainty arising from the sanctions related to the Russia-Ukraine conflict, as fruit producers have delayed decisions on harvesting and packaging of some products until they are able to establish which markets to service and how. Their operations were impacted by [several] factors including port constraints in South Africa and adverse weather in some regions.”
Read: A have a look at the ripple impact of the Russia-Ukraine battle
The group says its buying and selling surroundings was confronted with world provide chain constraints that impacted the associated fee and availability of most uncooked supplies and new capital tools. It noticed delays in the manufacturing and shipping of capital tools ordered primarily from Europe and Asia.
However, uncooked materials stock was elevated to mitigate lengthy lead instances and intervals of macroeconomic uncertainty.
Project prices have been restricted to permitted budgets, however a couple of exceptions associated to shipping delays and alternate fee actions remain.
Paper
Mpact’s paper enterprise section recorded a 5.9% hike in income to R4.9 billion (June 2021: R4.6 billion). The enhance was supported by improved shopper demand in the economic and QSR sectors in addition to progress in new product gross sales starting from residence supply and courier paper baggage. Sales have been nonetheless partially impacted by the decrease demand from the fruit sector.
The section’s working revenue was up 31.8% to R457.6 million because of improved buying and selling.
Read: New EU legislation might see R600m value of SA citrus en path to Europe destroyed
Plastics
Revenue in the plastics enterprise elevated 1.2% to R848.6 million whereas gross sales volumes dipped to six.4% because of decrease gross sales in its Bins and Crates operations, nonetheless FMCG operations have been in line with the prior interval.
“Production of bins and crates was lower than the prior period as a result of delays in the arrival of new equipment from overseas, and in part due to operational issues impacting sales,” it mentioned.
“This equipment was required to offset the planned relocation of existing equipment between plants as part of the establishment of the new Castleview factory in Gauteng.”
Operating revenue in the plastics section decreased to R3.5 million (June 2021: R40.5 million) because of decrease gross sales volumes and prices related to the KwaZulu-Natal floods of R11.6 million.
Read: SA halts shipping at key port of Durban after heaviest downpour in six many years
Outlook
Mpact says it expects to proceed to profit from strong home containerboard and cartonboard demand as all its paper machines are totally booked till the tip of present annual provide agreements, which shall be finish of September.
However, provide and demand stability will remain tight for the foreseeable future because of ongoing world provide chain constraints, the tightening of financial coverage globally in addition to market uncertainty arising from the Russia-Ukraine battle and its impact on the prices of vitality and meals.
“In the face of continued macroeconomic uncertainty, the focus of the Mpact management team remains on the value-enhancing strategy of the business aimed at optimising our portfolio and growing organically and through acquisition,” Strong added.
“Mpact’s integrated business model is uniquely focused on closing the loop in paper and packaging, positioning the group to benefit from the ongoing drive towards a circular economy by brand owners, manufacturers and governments alike.”
The group declared an interim dividend of 40 cents per share.
Listen as Simon Brown chats to Tim Holden, MD of Caxton, which holds a big stake in Mpact (or learn the transcript right here):
Palesa Mofokeng is a Moneyweb intern.