Johannesburg, 12 August 2015. Mpact, one of the leading paper and plastics packaging businesses in southern Africa, reported a pleasing set of interim results for the six months ended 30 June 2015.
The Groupâ€™s underlying operating profit grew by 26.8% to R342 million, while basic underlying earnings per share increased 47.4% to 135.3 cents.
Commenting on the results, Bruce Strong, Chief Executive Officer of Mpact said, â€œWe are pleased with our performance, which reflects an improved performance in Plastics, following the successful restructure of the FMCG business during 2014, good volume growth, and a better operating profit margin. The Paper business once again delivered steady volume growth underpinned by sales growth in the fruit sector.â€
Mpact reported a 10.8% revenue increase to R4.4 billion, mainly as a result of volume growth, higher selling prices, and a favourable sales mix.
The Paper business posted revenue growth of 12.1% to R3.3 billion with organic sales volume growth of 2.4%. Underlying operating profit increased by 12.4% to R315.4 million, as a result of higher selling prices and a favourable product mix, which were partially offset by increased raw material costs. In the Plastics business, revenue increased by 7.3% to R1.1 billion on the back of good volume growth across all sectors, except FMCG, which declined following the restructuring in 2014.Underlying operating profit was up by 98.9% to R87.3 million, benefiting from a favourable product mix and cost savings.
Net finance costs were 2.9% lower from R59.6 million to R57.9 million in the comparable period last year.
Net debt at 30 June 2015 was R1.7 billion, an increase of 22.8% from 30 June 2014, mainly due to investments in major capital projects. The gearing ratio increased to 34.2% (June 2014:32.5%)
Mpact Chief Financial Officer Brett Clark said, â€œAs part of the Felixton mill rebuild, we secured an 8-year loan facility of R200 million with the KwaZulu-Natal (KZN) Growth Fund, at a fixed interest rate of 9.15%. Additionally, we swapped the variable interest rate on an existing R500 million facility to a fixed rate of 9.49% maturing in December 2019. The net result is the interest rate on approximately 40% of Mpactâ€™s current debt being fixed.â€
The effective tax rate for the period was 21.1% (June 2014: 30.0%). The lower effective tax rate is due mainly to the recognition of deferred tax on previously unrecognised tax losses.
Basic and underlying earnings per share increased by 47.4% to 135.3 cents (June 2014: 91.8 cents).
Headline earnings per share for the period was 134.4 cents (June 2014: 91.5 cents).
During the period under review, Mpact successfully implemented a Broad-Based Black Economic Empowerment (B-BBEE) transaction, which resulted in the establishment of the Mpact Foundation Trust and an improved B-BBEE rating of Level 3 from Level 5.
Mpact declared an interim gross dividend of 30 cents per ordinary share, a 15.4% increase compared to the same period last year.
â€œLooking ahead, we expect subdued economic growth in South Africa, which will make it difficult to maintain similar levels of volume growth in the second half of this year. In addition, we are concerned about cost inflation in inputs such as raw materials, labour, electricity and other administered services.
Additionally, while it is premature to predict the short-term consequences of the recent developments in the South African paper packaging sector, we believe that our interventions such as the Felixton mill rebuild, PET recycling (rPET) plant and our other investments in the recycling and corrugated businesses will ultimately improve our prospects.
Finally, our major capital expenditure projects are progressing on schedule and within budget. The R350 million rPET plant in Germiston is currently in the start-up phase following its recent commissioning, while the second phase of the R765 million Felixton mill upgrade, near Empangeni in KZN, is on track to be completed in 2017,â€ Strong concluded.
Keyter Rech Investor Solutions
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JSE code: MPT
Mpact, formerly Mondi Packaging South Africa before demerging and then listing on the JSE, is a leading manufacturer of paper and plastics packaging in southern Africa. The Paper business is integrated across the recycled paper-based corrugated and converted paper products packaging value chain, comprising three divisions: Recycling, Paper manufacturing, and Corrugated and Converted Paper Products.
The Plastics business manufactures rigid plastic packaging for the food, beverage, personal care, home care, pharmaceutical, agricultural, and retail markets. Products include PET preforms, bottles and jars; plastic jumbo bins, wheelie bins, pallets and crates; plastic containers for the Fast Moving Consumer Goods (FMCG) market; styrene and PET trays, fast food containers and clear plastic films.
Mpact employs 4,366 people across its 33 operations in South Africa, Botswana, Namibia, Mozambique and Zimbabwe.