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Mpact Limited
(Incorporated in the Republic of South Africa)
(Company registration number 2004/025229/06)
Income tax number: 9003862175
JSE Share Code: MPT JSE ISIN: ZAE 000156501
("Mpact" or "the Group" or "the Company")
UNAUDITED INTERIM RESULTS AND CASH DIVIDEND DECLARATION
FOR THE SIX MONTHS ENDED 30 JUNE 2024
KEY FINANCIAL DATA
- Net asset value per share up 9% to R34.11 from June 2023
- Satisfactory progress on strategic projects and portfolio optimisation
- EBITDA of R763 million
- Underlying operating profit of R455 million
- Headline earnings per share of 145 cents
- Interim dividend per share of 30 cents
COMMENTARY FROM CONTINUING OPERATIONS
OVERVIEW
As anticipated, the challenging economic and trading environment persisted during the six months ended
30 June 2024. The uncertain socio-political environment leading up to the national elections, high levels
of loadshedding that continued until the end of March, high inflation and interest rates all contributed to
weak consumer and business sentiment.
Bruce Strong, Mpact Chief Executive Officer, said: "Against this backdrop, we are pleased to report a 9%
increase in our net asset value per share over the past year to R34.11. For the first six months ended
30 June 2024, the Group generated EBITDA of R763 million and cash from operations of R516 million.
Although lower than last year, this demonstrates our resilience through the cycle.
We have also continued to drive our value enhancing strategy, of aligning our business to growth sectors
with sustainable returns and enhancing our operational resilience. Our solar PV generated power
amounting to 16MWp saved us over R18 million in electricity costs during the first half of the year.
The Mkhondo mill upgrade project of R1.3 billion is progressing well, with construction underway and
most of the critical equipment ordered. The project is expected to be completed as planned during the first
half of next year."
Mpact Operations (Pty) Ltd ("Mpact Operations"), the Group's main trading entity in South Africa, retained
its Level 1 B-BBEE status.
FINANCIAL REVIEW
Group revenue from continuing operations for the period ended 30 June 2024 decreased by 1.1% to
R6.173 billion (June 2023: R6.240 billion), primarily due to a 2.1% decrease in sales volumes.
Underlying operating profit decreased to R423 million (June 2023: R531 million), as a result of lower selling
prices in the Paper business, the under-recovery of fixed costs and higher depreciation from major projects
capitalised towards the end of 2023.
Return on capital employed for total operations was 14.4% (June 2023: 18.8%) due to relatively large
capital outlays for the strategic growth projects which are still in progress.
Paper business
Revenue of R5.097 billion was 3.3% lower than the prior period (June 2023: R5.269 billion) due to lower
sales volumes, as well as lower containerboard and cartonboard selling prices.
Paper Manufacturing total sales volumes were in line with the prior period with an increase in exports
offsetting a decline in domestic sales. The continued slowdown in both containerboard and cartonboard
sales necessitated production downtime at all three paper mills to manage inventory levels and conserve
cash. This resulted in downtime amounting to approximately 13% of their capacity during the period, which
includes eight days at the Springs mill due to utility outages.
In Paper Converting, sales volumes declined by 1.4% with an increase in the agricultural sector offset by
a decline in the industrial sector.
Underlying operating profit decreased to R397 million (June 2023: R548 million) due to the under-recovery of
fixed costs, non-recurring costs of R25 million as well as higher depreciation from major projects which
were capitalised towards the end of 2023.
Plastics business
Revenue in the Plastics business of R1.097 billion increased by 10.6% (June 2023: R993 million). Sales
volumes increased by 2.7% with growth in the Bins & Crates and FMCG businesses on the back of recent
investments and new products offset by a decline in Preforms & Closures.
Despite the increase in revenue, operating profit was in line with the prior period at R64 million with an
increase in Bins & Crates offset by declines in the other two businesses. The decreases are mainly
attributable to non-recurring items amounting to R19 million. Depreciation increased by R14 million, or
18%, due to major projects capitalised towards the end of 2023.
Effective 1 April 2024, Mpact Plastic Containers Castleview Proprietary Limited acquired a 30% interest
in Africa Tanks (Pty) Ltd ("Africa Tanks") for a consideration of R73 million. Africa Tanks manufactures
plastic water tanks for the residential, commercial and agricultural markets and is the first blow-moulding
water tank manufacturer in Southern Africa.
Net finance costs
Net finance costs increased to R148 million (June 2023: R132 million) mainly due to higher average net
debt during the period. Finance costs of R19 million related to the Mkhondo Mill project were capitalised
during the period (June 2023: R2 million).
Earnings per share
Headline earnings per share decreased to 144.6 cents (June 2023: 211.6 cents) from total operations
and to 122.2 cents (June 2023: 188.2 cents) from continuing operations. Basic earnings per share
decreased to 146.3 cents (June 2023: 214.1 cents) from total operations and to 123.9 cents
(June 2023: 190.7 cents) for continuing operations.
Net debt
Net debt increased to R3,230 million (December 2023: R2,665 million) with cash generation from operations
offset by outflows of R111 million for dividends and R490 million for capital investments, in line with
the Group's strategy.
DISCONTINUED OPERATION
Following a strategic review in 2021, Mpact's Board decided to sell its Plastic Trays & Films business,
Versapak, as a going concern. Versapak currently forms part of the Plastics Division of Mpact Operations.
On 31 July 2024, Mpact entered into a sale of business agreement with Greenpath Recycling Proprietary
Limited (a wholly owned subsidiary of Sinica Manufacturing Proprietary Limited) ("Sinica"), whereby Mpact
will dispose of Versapak as a going concern for a purchase price of R268 million. The purchase price will
be adjusted based on the actual amount of stock on hand and the value of certain employee liabilities as
at the effective date of the disposal.
The disposal excludes all cash, debtors and creditors of the business. Also excluded from the disposal are
the two properties from which the business operates. The parties have therefore also entered into two
separate lease agreements in terms of which Sinica will lease these properties on market-related terms.
Mpact anticipates the effective date of the disposal to be in the second half of 2024, subject to the approval
of the competition authorities having been received timeously. The disposal proceeds will be applied
towards the settlement of debt.
For the period ended 30 June 2024, Versapak reported revenue of R485 million (June 2023: R545 million),
and net earnings of R33 million (June 2023: R34 million). Versapak's net assets held-for-sale at period end
were R247 million (June 2023: R173 million; December 2023: R239 million).
OUTLOOK
Business and consumer sentiment has started to improve on the back of the positive outcome of the
national elections, lower inflation, no loadshedding since April 2024, and a possible interest rate cut
later this year. This bodes well for all our operations as any recovery in the economy should translate into
improved demand which we are well positioned to meet.
The recent changes and improvements at Transnet and Eskom, together with their commitment to
proactively respond to challenges, should further support growth in South Africa. This in turn will benefit
the prospects for all manufacturers. These improvements will also directly benefit our fruit exporting
customers who have already invested extensively for growth.
Notwithstanding the above, we still expect our full year earnings to be under pressure relative to last year.
Should demand pick up notably, the second half of this financial year could be better than the
corresponding period of last year. However, this may not be enough to fully offset the first half decline in
earnings.
We are expecting an increase in containerboard and cartonboard sales volumes, however, lower average
selling prices may partially reduce the benefits of the positive operating leverage for the Group.
The performance of the Plastics business is anticipated to improve on the back of recent investments in
Bins & Crates, which may be partially offset by lower sales in the Preforms & Closures business.
The disposal of Versapak is expected to be completed by the end of the financial year, subject to
regulatory approvals. The net proceeds will be used to reduce debt.
We will continue to focus on our value-enhancing strategy, which prioritises growth sectors and investments
in innovative, higher margin and sustainable products.
BOARD CHANGES AND RETIREMENT OF CHIEF FINANCIAL OFFICER
Effective 17 May 2024, Ms Fikile Futwa was appointed to Mpact's Board as an Independent Non-executive
Director and as a member of the Audit and Risk Committee. The Board is very pleased to welcome Fikile
and looks forward to her contribution to the Company.
Hannes Snyman was appointed as the Mpact Group Chief Financial Officer and an Executive Director
effective 1 June 2024 following the retirement of Brett Clark on 31 May 2024.
Tim Ross retired at the Annual General Meeting held on 6 June 2024, having served as a non-executive
director on the Board since Mpact listed in 2011. Tim simultaneously retired as the Chairman of the Audit
and Risk Committee, as well as a member of both the Remuneration Committee and Nomination Committee.
The Board would like to thank Tim for his invaluable contribution and wishes him well in his retirement.
DIVIDENDS
The Board has resolved to declare an interim gross cash dividend of 30 cents per ordinary share for the
six months ended 30 June 2024 (24 cents per share net of dividend withholding tax) (June 2023: 45 cents
per ordinary share). A dividend withholding tax of 20% will be applicable to all shareholders who are not
exempt. The dividend has been declared from income reserves.
The Company's total number of issued ordinary shares at the date of this announcement is 149,453,688.
Mpact's income tax reference number is 9003862175.
Salient dates for the cash dividend distribution
Event 2024
Publication of dividend declaration Monday, 5 August
Last day of trade to receive a dividend Tuesday, 27 August
Shares commence trading "ex" dividend Wednesday, 28 August
Record date Friday, 30 August
Payment date Monday, 2 September
All times provided are South African local time.
Share certificates may not be dematerialised or re-materialised between Wednesday, 28 August 2024 and
Friday, 30 August 2024, both days inclusive.
FINANCIAL SUMMARY
Continuing operations Total operations
Six months Six months Six months Six months
ended ended ended ended
30 June 30 June 30 June 30 June
R'million 2024 2023 2024 2023
Revenue 6,173 6,240 6,658 6,785
Underlying operating profit1 423 531 455 564
Underlying profit before tax2 286 409 319 443
ROCE 13.5% 18.7% 14.4% 18.8%
Basic and underlying EPS (cents) 123.9 190.7 146.3 214.1
Basic HEPS (cents) 122.2 188.2 144.6 211.6
Net debt R3,230 million (June 2023: R2,640 million; December 2023: R2,665 million)
Interim gross dividend per share (cents) 30 cents (HY2023: 45 cents)
(1) Underlying operating profit is the Group's operating profit before special items.
(2) Underlying profit before tax is the Group's profit before tax and before special items.
The Group presents certain measures of financial performance, position or cash flows that are not defined
or specified according to International Financial Reporting Standards (IFRS). These items are referred to as
special items and are defined in the Group accounting policies included in the Condensed Consolidated Interim
Financial Statements for the six months ended 30 June 2024.
This short-form announcement is the responsibility of the directors and is only a summary of the
information in the interim financial statements and do not contain full or complete details. This short-form
announcement has not been reviewed or audited by the Company's external auditor. Any investment
decision should be based on the unaudited financial statements which is available on our website:
https://www.mpact.co.za/investor-relations/financial-results/2024/HY2024.pdf, and on
https://senspdf.jse.co.za/documents/2024/JSE/ISSE/MPT/HY2024.pdf
The announcement is also available for inspection at our registered offices at no charge during office hours.
AJ Phillips
Chairman
BW Strong
Chief Executive Officer
5 August 2024
COMPANY PROFILE
Mpact is the largest paper and plastics packaging and recycling business in southern Africa, employing
5,339 people (June 2023: 5,349 people), and generating revenue from total operations of R6.7 billion in the
six months ended 30 June 2024.
Sales in South Africa account for approximately 89% of Mpact's total revenue for the current period while
the balance was predominantly to customers in the rest of Africa.
The Group operates across 41 sites, comprising 23 manufacturing sites, and 15 recycling operations.
Proximity to our customers contributes to faster response times, reduces transport costs and creates
economies of scale. Our integrated business model is uniquely focused on closing the loop in plastic and
paper packaging through recycling and the beneficiation of recyclables.
Our strong customer relationships, a thorough understanding of the sectors we operate in, and our
commitment to innovation allow us to continue creating fit-for-purpose sustainable packaging solutions as
well as value-added services that anticipate our customers' needs.
DIRECTORS
Independent Non-Executive:
AJ Phillips (Chairman), PCS Luthuli, M Makanjee, DG Wilson, ABA Conrad and FC Futwa
Executive:
BW Strong (Chief Executive Officer), JJ Snyman (Chief Financial Officer)
Company secretary:
DM Dickson
Registered office:
4th Floor, No.3 Melrose Boulevard, Melrose Arch, 2196
Transfer secretaries:
JSE Investor Services (Pty) Limited
One Exchange Square, 2 Gwen Lane
Sandton, 2196
Sponsors:
The Standard Bank of South Africa Limited
30 Baker Street, Rosebank, 2196
(PO Box 61344, Marshalltown, 2107)
Auditors:
PricewaterhouseCoopers Inc. (PwC)
4 Lisbon Lane, Waterfall City, Jukskei View, 2090
(Private Bag X36, Sunninghill, 2157)
Date: 05-08-2024 08:00:00
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