Paper and plastic packaging manufacturer Mpact says it experienced tough trading conditions in the year that ended on December 31, 2019.
“Trading over the past year across most of our businesses has been very challenging from a demand perspective.
“The South African economy remained weak and business and consumer confidence have been hit hard by load-shedding and uncertainty in a number of areas,” says Mpact CEO Bruce Strong.
He adds that such factors had a marked effect on its customers and particularly its consumer-facing businesses. Sales volumes were under pressure across most sectors.
Notwithstanding the trading environment, underlying earnings before interest, taxes, depreciation and amortisation from continuing operations of R1.276-billion was in line with the prior year, with underlying operating profit of R724-million declining 3.7%.
Recent capital investments such as the Felixton paper mill upgrade and the new corrugator in Port Elizabeth contributed positively to the results.
Further, good progress was made in developing innovative packaging alternatives for its customers, some of which were recognised with a number of awards.
Strong explains that, during the year, Mpact’s paper punnets and paper bags for grapes, tomatoes and other fruit gained prominence and market acceptance, and can now be seen on retail shelves locally and abroad.
“Our investment into shopper bags has been positive, with two additional paper bag formers installed in 2019.
“The shopper bags are made from 100% recycled paper produced at Mpact’s Felixton mill, providing a strong, sustainable substitute for plastic shopper bags,” he says.
One of the most difficult decisions the company took was to shut the polyethylene terephthalate (PET) recycling plant, Mpact Polymers, because it was unable to obtain a sustainable price for its recycled PET.
Consequently, Mpact Polymers has been deconsolidated from the group, and its profit and loss statement for the reporting period is disclosed separately as a discontinued operation, Strong states.
Group revenue from continuing operations of R11.1-billion was 5.1% higher than the prior year’s R10.5-billion, with higher average selling prices offsetting lower sales volumes.
He explains that, from January 1, 2019, Mpact adopted the new accounting lease standard, International Financial Reporting Standard 16, which decreased profit before tax by R33-million and underlying earnings a share by 14c.
Underlying operating profit from continuing operations decreased by 3.7% to R724-million, compared with R752-million in December 2018 with return on capital employed at 11.8%, which was a decrease from 11.9% in December 2018.
“Through our focus on innovation and the introduction of new product offerings, we will continue to work with our customers to develop new markets,” concludes Strong.