SOUTH AFRICA – Mpact, one of the largest paper and plastics packaging business and recycler in southern Africa, delivered a pleasing performance in 2021, successfully navigating the challenging business environment.
Group revenue from continuing operations increased by 13% when compared to the prior year to R11.5 billion as a result of an 8.8% increase in sales volumes and a 3.8% increase in the average price.
Underlying EBIT from continuing operations increased by 56% to R948 million and underlying earnings per share increased by 93% to 360 cents.
“Mpact has once again shown tremendous resilience, firmly anchored in our purpose of providing our customers with innovative sustainable packaging, giving effect to the circular economy through our integrated business model and making a difference in the communities where we operate.
“Good progress was made in implementing the Group strategy through a combination of investments and portfolio optimisation,” said Bruce Strong, Chief Executive Officer of Mpact.
Paper business revenue buoyed by rising sales volumes
Mpact’s paper business registered 12.2% rise in revenue to the prior year to R9.7 billion, external sales volumes increased by 8.7% and the average price increased 3.5%.
According to the company, the good performance in the first half continued in the second half with strong local containerboard and cartonboard demand.
In addition, the paper converting division benefited from the recovery in the industrial and quick service restaurant sectors as well as the growth from new products sales.
Underlying EBIT for the Paper business increased by 51.5% to R875 million due to a favourable product mix with low margin rolled pulp not being produced or sold in 2021 and improved operational efficiencies.
Higher raw material costs during the year were partially recovered through paper selling price increases in the last quarter of 2021 and we expect to realise the full margin benefit in 2022.
Plastic segment attains nearly quarter growth in revenue
Meanwhile, revenue in the plastics business was up 14.2% to R1.9 billion due to good demand in Bins and Crates and a recovery of volumes in Preforms and Closures, offset by lower demand in FMCG. Overall, volumes increased by 9.5% with price and mix up 4.7%.
Underlying EBIT increased by 33.7% to R200 million due to good growth across most sectors and a lower depreciation charge, partially offset by delays in increasing selling prices to recover higher polymer costs. The underlying operating margin improved to 10.7%.
Headline earnings per share (HEPS) increased 89% to 343.2 cents while underlying basic earnings per share (EPS) improved 93.2% to 359.6 cents.
Notwithstanding the significant return of cash to shareholders during the period through the successful share buy-back, the Board has resolved to declare a final gross cash dividend of 50 cents per ordinary share for the financial year ended 31 December 2021.
Mpact to offload Versapak
Following a strategic review, Mpact’s Board has decided to sell its plastic trays and films business, Versapak as the segment is not fully aligned with Mpact’s strategy.
The company is currently in the early stages of engagement with potential buyers for the business. It is anticipated that the sale could take several months to complete.
For the year ended 31 December 2021, Versapak reported revenue of R920 million, and net earnings of R2 million, which equates to basic EPS of 1.5 cents. Versapak’s net asset value as at 31 December 2021 was R301 million.
Mpact is expected to continue to benefit from the strong global containerboard and cartonboard market as well as increased demand for locally-produced products.
In addition, the annual paper selling price increase realised at the end of 2021 will assist the Group in recovering increases in raw material costs.
However, the ongoing effects of Covid-19 and the general tightening on monetary policy could negatively affect consumer spending while the pressure on input costs is likely to remain.