Ahead of the release of its audited financial results on March 7, paper and plastics manufacturer Mpact reports that its revenue for 2022 increased by about 7% to R12.4-billion, driven by paper demand and higher selling prices.
In the paper business, good demand for containerboard and cartonboard continued in the second half of the year, while higher sales volumes were experienced in the paper converting business.
Mpact also points out that selling prices in the paper business increased in the fourth quarter of 2022 to recover higher input costs.
Excluding revenue relating to the Baywhite distribution agreement with paper manufacturer Mondi that terminated at the end of December 2021, Mpact group revenue increased by 15% and sales volumes by 6%.
Sales volumes in the plastics business were at similar levels to 2021, with the exception of the fast-moving consumer goods business, which was negatively affected by seven days of downtime at the Pinetown factory attributable to the floods in KwaZulu-Natal, coupled with lower demand from customers.
As such, Mpact’s underlying earnings before interest and tax (Ebit) are expected to increase by about 23% on 2021 Ebit of R948-million.
As such, the company expects its earnings a share for all operations to increase by between 34.6%% and 48.7% to between R4.75 and R5.25.
Headline earnings a share for all operations are expected to increase by between 32.5% and 47%, to between R4.55 and R5.05.
Underlying earnings a share for the year are expected to range between R4.75 and R5.25 – an increase of between 31.5% and 45.4%.
Net finance costs are expected to be about R184-million – higher than the R140-million of 2021, as a result of increased average net debt and higher interest rates. Net debt of R2.33-billion increased from the R1.76-million of 2021 mainly owing to cash outflows in respect of capital expenditure investments of R1-billion, as well as increased working capital.
In terms of growth and sustainability investment, Mpact put R1.2-billion into its Mkhondo paper mill to meet growing virgin containerboard demand for quality, sustainable, fresh produce packaging driven by robust growth in the South African export fruit sector.
This follows the development of Mpact Plastic Containers’ new Castleview production and Brits recycling facilities, Mpact Corrugated’s new customer service centre in Limpopo and Mpact Recycling’s new purpose-built facility in KwaZulu-Natal.
In addition, the group expanded its overall solar photovoltaic (PV) generation capacity at a further five plants in 2022, taking the group’s total solar PV capacity to 10.8 MW.
Collectively, Mpact says its new investments enable it to take advantage of its unique circular economy business model, while positioning Mpact to deliver sustained revenue and margin-enhancing growth.
The group says it has a strong balance sheet and has sufficient debt facilities to implement Mpact’s strategy.
As for business held-for-sale and discontinued operations, Mpact reports that Versapak achieved revenue of R1.10-billion by December 31, 2022 – up from the R920-million of 2021.
Versapak’s net earnings at period’s end totalled R65-million, up from the R2-million of 2021, equating to basic earnings a share of 44c – up from the 2c apiece of 2021.
However, during 2022, Mpact decided to exclude Versapak’s trade receivables, cash balances and trade payables from the assets and liabilities held for sale to reduce the complexity of a transaction.
This has resulted in Versapak’s net asset held-for-sale decreasing to R191-million, down from R301-million in 2021.