Saad’s woes mount but some may be baseless
It’s been a tough year for Aspen founder and CEO Stephen Saad. For a long time, it seemed he could do no wrong; now it feels like he’s not doing much right — anywhere in the world. That may be inevitable for a high-profile executive of a high-profile listed company and it may have as much to do with the fickleness of the media as with the fickleness of fate.
It could be worse. Consider the unmitigated mess Dudu Myeni has got herself into at South African Airways (SAA). It was going to be difficult for even the smartest of operators to rescue SAA from the self-destruct course it seems to have been on for much of the past 25 years. Has it ever been profitable? Even when it was buried in the bowels of the old South African Transport Services, it probably didn’t make a profit given that it was a monopoly and, as a rule of thumb, about 30% of the passengers were nonpaying.
Talk of monopoly brings us back to Aspen and the recent rather strange Competition Commission news conference, that was announced in dramatic fashion last week. The commission has done some really great work over the years trying to root out market-corroding practices by powerful companies. And goodness knows we do all love to hate pharmaceutical companies, largely because they have so much power and involve us forking out huge sums on grudge purchases. While an investigation might be useful for getting clarity on pricing strategies, it’s hard not to see politics more than economics at play.
Mpact’s soaring trajectory since listing in 2011 seems to have come to a juddering halt. The share lost more than 10% this week as the plastics and paper packaging and recycling group anticipated another set of iffy results.
The stock has been in a volatile downward spiral since the early months of 2016. In results for the year to December 2016, higher recovered paper costs, lower containerboard sales, a higher tax rate and rising finance costs capped profits.
In a trading update this week, Mpact says that when compared with the matching period in 2016, its results for the six months to June are expected to be hit by lower sales volumes in the paper and plastics converting businesses, lower domestic containerboard and cartonboard sales, and higher recovered paper costs.
Muted consumer demand across most of its product sectors and the effect of drought on fruit volumes have combined with reduced purchases by those customers that have added capacity in their own paper mills.
On top of this, the scheduled downtime of Mpact’s R765m Felixton paper mill upgrade, which is due to be completed in the second half of 2017, will result in nonrecurring additional costs and lost production.
At the end of December 2016, unrecognised losses attributable to its new recycled plastic bottles plant, Mpact Polymers, in which the group has a 79% stake, were R265m. Ramp-up has been constrained by insufficient grinding capacity.
Mpact hopes the Felixton mill upgrade will increase earnings per share in the fairly near future. It says that once complete, it will significantly improve its cost competitiveness, product quality and offering in the recycled containerboard and corrugated markets.