SA paper and plastics packaging group Mpact expects a mixed half-year performance as weak consumer demand and economic uncertainty weigh on its business.
The group’s revenue from continuing operations is expected to increase by about 3% compared to the prior period, the company said on Wednesday.
The rise was mainly driven by a 7% increase in paper division revenue, driven by higher containerboard sales volumes due to export growth and local market gains. However, this growth was partially offset by lower cartonboard and corrugated sales volumes.
Despite an increase in revenues in the paper division, the company said margins were squeezed by rising recovered paper costs, energy prices and fixed overheads, putting pressure on operating profits.
‘Slower-than-expected’
The group’s plastics division revenue fell about 15%, weighed down by the loss of key contracts at FMCG Wadeville last year and “slower-than-expected” new business.
While sales volumes of beverage crates fell, the company said growth in agriculture crates and strong performances at FMCG Pinetown and Atlantis helped offset some of the losses.
Mpact said its plastics sales and profits usually pick up in the second half of the year, and it expects this trend to continue.
The company projects earnings before interest, tax, depreciation and amortisation (ebitda) to drop by about 15% to R621m, from R731m in the first half of last year. Underlying operating profit is expected to shrink more sharply, by about 26%, from R423m.
Headline earnings per share (HEPS) from continuing operations are expected to be 88c-100c, down about 19% to 28% from 122c a year earlier.
When factoring in total operations — which include the prior period contribution from the Versapak business divested in November 2024 — HEPS declines are even more pronounced, the company said.
Mpact trimmed its net debt to about R2.99bn from R3.23bn a year earlier, helped by stronger cash flow. The company also reported ongoing work on projects targeting growth markets, new products and higher-margin segments.
The company is scheduled to release its unaudited interim results for the six months to end-June on August 4.
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