Mpact optimistic as it cuts exposure to SA consumers
• Strategy to invest in operational resilience is bearing some fruit but pressures remain domestically, says CEO Bruce Strong
Mpact, Southern Africa’s largest paper and plastics packaging business and recycler, is banking on returns from its capital projects in consumer-resistant sectors for growth.
The JSE-listed industrial group reported it was making headway in its operational resilience and optimisation strategy, which dates back to 2021.
“We’ve spent the last number of years rearranging our portfolio to increase our exposure to sectors that are less dependent on consumer spending in SA,” CEO Bruce Strong said in an interview with Business Day.
“Our focus in the last eight [to] nine years was to expand our exposure to the fruit sector, to the recycling and recovery of recyclables alongside beneficiation of recyclables which don’t require consumer spending for growth as people change their patterns.
“That portfolio reorganisation is bearing some fruit in our business, but there is no doubt that we do face a number of the pressures that we are seeing in SA across the board,” he added.
Headline earnings per share (HEPS) for total operations rose 8% to 512c for the year ended December, while HEPS for continuing operations were 3% higher at 443c.
Profit from continuing operations declined to R601.8m from R733.2m a year ago.
The group achieved record cash generated from operations of R2bn, it said in a statement on Friday.
The total dividend per share for the year was up 4% to 120c.
Mpact, which has a market capitalisation of R4.1bn, was among the companies that benefited from the global pandemic-related lockdowns that spurred the rise of online convenience shopping. It made significant investments to ensure it can cash in on high demand.
BOLSTER CAPACITY
In 2021 the board approved spending of more than R500m to support customer-focused growth, innovation and sustainability, targeting sectors such as export fruit, convenience shopping and recycling.
The Johannesburg-based group said the bulk of its cash outflow for 2023 was directed into capital projects meant to bolster capacity in high-demand segments, including recycle-based bag paper.
Net debt rose to R2.6bn from R2.3bn.
Despite the effect of reduced consumer spend being evident across many of Mpact’s businesses, Strong said the company delivered a resilient performance in a challenging economic environment, providing tangible evidence of its prudent strategy.
He said the group reached key milestones in its strategic development during the year, including significant progress in several capital investment projects for growth and operational resilience, and its business portfolio optimisation.
The Felixton Mill and Mbombela Corrugated upgrade projects were completed during the second half of the year.
“We’ve invested quite a fair amount in the production of corrugated boxes for the fruit sector in the various factories that we have,” Strong said, adding that those projects were delivering against expectations. “Despite the challenging environment in SA, with our portfolio focus we are still seeing tremendous opportunities and we are investing in those opportunities.”
Amid unabated electricity and water supply disruptions, Mpact has also invested in solar power and water supply and storage at its operations.
Another 6.7MWp (megawatt peak) of solar PV capacity was added, bringing the group’s total solar capacity to about 16MWp.
Other projects — such as Mpact Plastic Containers’ (Bins & Crates) Castleview factory expansion and upgrades to the Gqeberha paper converting factory and Mkhondo paper mill — were on track to meet the targeted financial returns, he said.
The big improvement expected in the Bins & Crates business in 2024 is likely to be partly offset by lower sales in Preform & Closures.
Strong said the group was making progress in selling its discontinued plastic trays and films business, Mpact Versapak, with its assets and liabilities held for sale.
Mpact shares closed 0.25% higher on Friday at R28.08.