Mpact, SA’s biggest paper and plastics packaging business and recycler, intends to complete four new operating sites across SA over the next 18 months as part of its multimillion-rand investment in new capacity to meet growing demand, says CEO Bruce Strong.
The paper and plastics packaging group in June announced plans to spend R500m on new capacity after the company had benefited from strong demand from the domestic fruit sector and disruptions to global supply chains. The investment is also in line with Mpact’s intention to tap into a growing desire for in-country sourcing and with shifting consumer trends towards more eco-friendly products.
The sites — in Gauteng, Limpopo and North West — will produce items such as plastic crates or recycled glass and metal. “These are areas where we are strong already, but it is necessary to keep up with the growth of our customers,” Strong said on Thursday.
Mpact has 46 operating sites, 29 of these for recycling, and has more than recovered from the disruptive effects of Covid-19 in 2020, with revenue and profits bouncing back to prepandemic levels amid rising containerboard prices and robust demand in most sectors.
Group revenue for the six months to end-June increased 16.3% to R5.9bn, while underlying operating profit rose 165% to R337m, the latter also higher than the R218m posted in 2019.
The paper business, accounting for more than three-quarters of revenue, benefited from improved global containerboard prices and increased local sales at higher average prices, the group said.
The plastics business also experienced increased demand in most sectors even as Covid-19 curtailed production in the market and disrupted imports. “Those remaining have been able to supply into a market that is very strong,” Strong said.
Mpact, valued at R3.8bn on the JSE, said strong cash generation allowed it to trim net debt by almost a quarter to R1.46bn.
Customers continue to seek more sustainable solutions sourced locally instead of relying on imports and unsustainable packaging formats, the group said.
“They are also demanding even higher environmental, social and governance standards from their suppliers, which positions Mpact extremely well as a customer-focused business that is resolute, trustworthy and responsible,” the group said.
Mpact did not declare an interim dividend but repurchased 10% of issued shares during the period, returning R257m to shareholders. The group has returned R345m, or 14.5% of shares in issue, to shareholders over the past 12 months through share buybacks.
The third wave of the Covid-19 pandemic, which started in early June, has had a limited effect on business continuity to date, the group said, but recent violence in KwaZulu-Natal shuttered operations there for eight days at a cost of R20m to gross profit.
There were no injuries or damage to assets during the unrest, but Mpact said its profit may take another R20m hit from lost sales, which may be partially recovered by year end.
In afternoon trade on Thursday, Mpact’s shares were trading 2.27% higher at R26.18, having jumped almost 90% so far in 2021, and by three-quarters since the beginning of 2020.
Update: August 5 2021
This article has been updated with information throughout.
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