Packaging group Mpact announced on Tuesday that it had earmarked R500m in new investments to expand capacity to meet growing customer demand.
The planned capital expenditure came with a trading update, which showed a recovery in its financial results after hitting a soft patch in 2020 due to the fallout from Covid-19.
The R500m will be invested in new technology, plants, equipment and solar power production which Mpact said would improve efficiencies and expand capacity.
“Mpact is investing to take advantage of the significant structural shifts in the global economy as it rebounds from the Covid-19 slump, reorientates itself towards investing in green growth, and prioritises ESG [environment, social and governance] standards,” Mpact said in a statement.
“These shifts have increased demand for our range of products and seen both new and existing clients, as well as the financial markets, taking a keen interest in our circular economy business model.”
The share price rose 1.23% to close at R23.75 on the JSE on Tuesday, valuing Mpact at R3.4bn.
SA’s largest paper and plastics packaging group said its underlying profit more than doubled to R290m in the five months to May, compared with the same period a year ago, and exceeded pre-pandemic levels in both the plastic and paper businesses. Revenue was up 16% to R4.8bn.
Mpact, which is due to announce results for the six months to end-March in August, said its paper business, whose revenue was up 15% in the five months, benefited from improved global containerboard prices, increased local sales and higher average prices.
“The benefits of higher containerboard prices were partly offset by higher waste paper costs, which have increased dramatically since the end of 2020, along with a general increase in demand and pricing for commodities.”
Paper-converting sales volumes benefited from the recovery in the industrial and quick-service restaurant sectors. Growth in the agricultural sector was partly offset by a later start to the citrus season than in the previous similar period. Nevertheless, the 2021 citrus crop is still predicted to be up by as much as 8% from a year earlier.
While the plastics business increased revenue by 20%, Mpact said higher polymer prices have not yet been fully recovered in selling prices.
Sales of plastic packaging products benefited from increased demand in most sectors, but the benefit of increased sales was partially offset by significant increases in polymer prices, it said.
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