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Mpact reports 15.3% growth in underlying earnings per share

04 March 2015

  • Revenue of R8.6 billion up 11.9%
  • Underlying operating profit up 14.8% to R751 million
  • Basic underlying earnings per share up 15.3% to 269 cents
  • Return on Capital Employed (ROCE) up to 18.1%
  • Total gross cash dividend up 15.0% to 92 cents per share

Johannesburg, 4 March 2015. Mpact, one of the largest paper and plastics packaging businesses in southern Africa, reported increased earnings per share of 15.3% for the year ended 31 December 2014, despite a subdued market. The increase in profit margins and shareholder returns were attributable to Mpact's stringent cost control as well as productivity improvements resulting from its successful capital investment programme.

Bruce Strong, Chief Executive Officer of Mpact, commented: "Considering the many challenges within our sector and the broader economy during 2014, we are pleased to have delivered earnings per share growth of 15.3% and a return on capital employed of 18.1%."

Strong further said: "Despite the subdued economy, some sub-sectors of the Group's business such as bins, preforms, closures and containerboard showed good growth when compared to the prior year. Although the oil price declined during the second half of the year, this did not reflect in polymer prices, a key raw material, but it slowed the increases experienced over the past years, which were not fully recovered in selling prices."

The Group reported an increase of 11.9% in revenue to R8.6 billion and 14.8% in underlying operating profit to R751 million. Revenue growth was mainly driven by higher average selling prices and the inclusion of Detpak for the full year, which was acquired in September 2013. External sales volumes increased by 1% over the comparable prior year period. Underlying operating profit growth was attributable to productivity gains and other cost savings. The operating profit margin increased to 8.7% from 8.5% in the comparable prior year.

Brett Clark, Chief Financial Officer of Mpact said "We have been able to refinance Mpact's debt at slightly better rates while also extending the maturity periods, placing Mpact in a strong position for future growth. Our financial position remained healthy, with a gearing ratio of 29% at 31 December 2014."

The Paper business posted revenue growth of 12.5% to R6.3 billion and underlying operating profit growth of 11.9% to R711 million. The operating profit margin decreased slightly to 11.3% as a result of the under-recovery of raw material price increases, most notably waste paper and purchased containerboard.

In the Plastics business, revenue increased by 10.4% to R2.3 billion, underlying operating profit was up by 24.8% to R132 million with the underlying operating profit margin also improving to 5.6%.

Basic and headline earnings per ordinary share for the year were 259.1 cents and 262.7 cents, respectively. Underlying earnings per share improved by 15.3%, compared to the prior year, to 269.2 cents per share. Mpact declared a final gross dividend of 66 cents per ordinary share, resulting in a total gross dividend for the year ended 31 December 2014 of 92 cents per ordinary share, a 15% increase on the prior year's total dividend.

Strong concluded: "The Group's two major capital projects, the R765 million-upgrade of the Felixton Paper Mill near Empangeni in KwaZulu-Natal and the R350 million recycled PET plant, are progressing according to schedule and within budget. The commissioning of the first phase of the Felixton Mill rebuild is scheduled for mid-year and the recycled PET project is scheduled to be commissioned during the second half of 2015. We are expecting growth to remain subdued in our markets for the foreseeable future. Nevertheless we do anticipate some benefits from lower oil prices and growth in fruit exports which we expect to outperform the local economy during the year. The restructuring of the FMCG plastics business last year should also provide some benefit during 2015. Uncertainty around the power supply from Eskom is being carefully monitored by the Group. We have a variety of interventions in place to reduce the effects of load-shedding."

The Group remains confident in its strategy, well-established market positions and ability to generate shareholder returns and will work diligently to meet its objectives.

Mpact also announced today that it has resolved to pursue a B-BBEE ownership transaction through its wholly-owned subsidiary Mpact Operations Proprietary Limited in terms of which it is anticipated that a B-BBEE trust will subscribe for 10% of the ordinary issued shares in Mpact Operations. For more information, please refer to the separate SENS announcement released today.

On behalf of:

Mpact Limited
Bruce Strong, Chief Executive Officer
Tel: +27 (0) 994 5508

Compiled and released by:

Keyter Rech Investor Solutions
Marlize Keyter
Tel: +27 (0)83 701 2021 / +27 (0) 87 351 3810
Email: mkeyter@kris.co.za