Strong packaging demand from the fruit sector, “stringent” cost control and lower tax and finance costs improved packaging group Mpact’s underlying earnings a share by 22.2% to 233.5c for the year ended December 31, 2013.

Underlying operating profit increased by 12% to R654.8-million, while an under-recovery of raw material price increases, especially in the plastics business, led to the operating profit margin marginally decreasing to 8.5% from 8.6% in the prior comparable period.

Mpact’s revenue rose by 12.9% to R7.7-billion for the 12 months, attributable mainly to volume growth in the plastics business and higher average selling prices.

External-sales volume growth of 4% was achieved.

“There was strong growth in the fruit sector in 2013 and that translated into growth in packaging and bulk bins. This was partially offset by subdued growth in the broader economy,” CEO Bruce Strong said in a statement on Wednesday.

He added that the weaker rand improved the business’s export competitiveness as well as the relative competitive position of Mpact’s manufactured products compared with imported substitutes, especially in the paper business.

“The benefits derived from the weaker rand in the paper business were partially offset in the plastics business, where polymer price increases reflected the levels of currency depreciation,” Strong said.

He further noted that, while there was some price recovery in the last quarter of the financial year in both the paper and plastics businesses, polymer price increases in the plastics business remained materially under-recovered.

In terms of divisional performance, revenue at Mpact’s paper business was up 10.5% to R5.6-billion, with external-sales volume growth of 3.2%.

Higher average selling prices were attributable to increases implemented during the last quarter of 2012 to cover input cost escalation, as well as “good” sales volume growth in higher value products, such as white top liner and fruit boxes.

Underlying operating profit in the paper business rose by 13% to R635.3-million, while the operating profit margin increased to 11.4%, primarily as a result of stringent cost control and a favourable product mix.

In the plastics business, revenue rose by 19.4% to R2.1-billion, mainly owing to volume growth of 10.7%.

The preform and closures business benefitted from good growth in the beverage sector, while growth in the agricultural sector benefitted the styrene and bulk bin businesses.

Average selling price increases achieved during the year were insufficient to fully offset polymer price increases of more than 20%.

“Consequently, underlying operating profit in the plastics business declined by 9.3% to R105.8-million and the underlying operating profit margin decreased to 5%,” said Strong.

The group’s net finance costs of R114.2-million were lower than the prior year by 10.6%, owing to lower average net debt and lower average interest rates experienced during the year.

Further, Mpact’s effective tax rate of 27.4% was lower than the prior year's 30% as a result of the repayment in 2012 of a loan on which the interest was not tax deductible.

Tax payments of R122-million were made during the year as a result of the company’s assessed loss being fully used during the course of the current year.

Net debt at the end of the period was R1.1-billion, an increase of R60-million from the prior year after capital expenditure of R387-million and acquisitions of R84-million.

Average net debt was 3.3% lower than the prior year.

The board declared a final gross cash dividend of 58c an ordinary share, payable on May 12.