Paper and plastics packaging group Mpact reported a weaker financial performance for the six months to end-June, with operating profit down more than a quarter from the year-earlier period.
In a statement on Monday, the company blamed SA’s weak economic growth and business confidence and geopolitical uncertainty, which resulted in lower sales volumes in the plastics segment.
Mpact’s plastics division manufactures rigid plastic products for the food, beverage, personal care, agricultural and retail markets, primarily in SA.
Revenue in the plastics business fell by 14.7% to R936m, shaving 2.8% off the group’s gross profit. As a result, headline earnings per share (HEPS) were down 27.4% to 93c.
The company was hopeful that its plastics unit would recover in the coming months, with profitability historically being “heavily weighted” towards the second half of the year.
Still, “a significant uplift in the SA economy seems unlikely in the near term”, it said.
“Coupled with a challenging global backdrop, we expect trading conditions to remain difficult in the second half of the year, with a corresponding impact on profitability,” said Mpact.
For its paper business, Mpact reported a 6.9% jump in revenue, thanks to higher sales volumes and a 1% uptick in average selling prices.
However, SA’s unstable power and water supplies dealt a blow to the paper unit earlier in the year, when the group’s large paper mill and corrugated factory in Ekurhuleni was without water or electricity for eight days.
Higher fixed costs, partly a product of these operational disruptions, resulted in a 12% drop in underlying operating profit for the paper business.
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