JSE-listed Mpact expects its underlying earnings before interest and taxes (Ebit) from continuing operations for the six months ending June 30 to be at least 50% lower than the R255-million in underlying Ebit reported for the six months ended June 30, 2019.
Mpact on June 23 warned that its basic earnings per share (EPS), headline earnings per share (HEPS) and underlying EPS from continuing and total operations for the period were likely to be at least 80% lower year-on-year.
The impact of the ongoing lockdown on the group’s financial performance remains uncertain, it stated.
Mpact noted that it was therefore not in a position at this stage to provide more specific guidance on the expected earnings for the interim reporting period.
A further trading statement would be released when the group had a reasonable degree of certainty on the expected HEPS and EPS ranges for the current six-month period.
COVID-19 IMPACT
For the duration of the nationwide lockdown imposed from March 27, in response to the Covid-19 pandemic, all divisions within Mpact were designated as essential service providers owing to Mpact being one of the critical supply chain links in the South African economy, producing paper and packaging for food, pharmaceuticals and other essential products.
As such, most of Mpact’s facilities have remained operational since the start of the lockdown.
Not all the packaging manufactured by Mpact is, however, used for the purposes of packaging essential goods. Consequently, non-essential production lines, such as those producing packaging for quick-service restaurants and alcoholic beverages, did not operate throughout the initial lockdown period.
Additionally, the nationwide lockdown has had a negative impact on demand for other paper and plastics packaging products, Mpact stated.
As a result, total sales revenue from continuing operations for the months of April and May declined by about 9% when compared to the same prior-year period and total revenue for the five months ended May 31 decreased by 3.2%.
Mpact has implemented numerous measures to reduce costs and conserve cash. Cash reserves are closely managed through monitoring available banking facilities, debtors’ payments, inventory levels and postponing non-essential capital expenditure.
Other cost initiatives include negotiating reduced rentals, employees agreeing to salary reductions, reviewing non-essential contracts and temporarily closing production lines, where necessary.
The group’s debt facility headroom as at May 31 was about R700-million and the group is expected to meet its debt facility covenants.
Mpact indicated that its first priority was to provide and maintain a safe and healthy work environment for all of its employees.
To this end, a comprehensive plan of action with stringent safety and hygiene practices to mitigate the risks associated with the pandemic has been implemented across all operations in addition to the strict pre-existing health and safety measures.