Mpact, a prominent manufacturer of plastic and paper products, faced a notable drop in earnings in 2024, with headline earnings per share (Heps) declining by 30% to 323.6c due to a tough trading atmosphere. The packaging firm ascribed this decline to economic uncertainty, rising costs, elevated interest rates, and ongoing load shedding, all of which eroded consumer and business confidence throughout the past year.
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Consequently, the company’s operating profit for the year decreased to R923 million, down from R1.2 billion in 2023, which had benefited from a significant recovery in paper margins driven by price hikes in late 2022.
“Despite these hurdles, Mpact achieved a solid cash flow from operations amounting to R1.9 billion, with a rise in net asset value per share to R35.76,” remarked Mpact CEO Bruce Strong.
With a market capitalization of R4.3 billion, the firm reported that certain operations performed exceptionally well even in the face of difficulties. Specifically, the paper division’s revenue rose by 2.7% to R11.0 billion, compared to R10.7 billion in 2023, thanks to a 3% increase in sales volumes.
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The paper manufacturing sector effectively adapted its market strategy to align better with current conditions, resulting in improved paper machine utilization and a reduction in commercial downtime to 6.6% of capacity for the year, down from 13% in 2023. However, these gains were somewhat countered by lower average selling prices.
The plastics sector likewise recorded an 8% increase in revenue, reaching R2.3 billion, propelled by a revamped product mix.
Looking forward
Mpact expressed optimism regarding its potential to capitalize on any economic recovery in South Africa, even as the local economy remains sluggish despite lower interest rates and falling inflation.
The company maintains a positive outlook on its value-enhancing strategy, which prioritizes growth sectors and investments in innovative, higher-margin, and sustainable products.
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These focal areas encompass fruit exports, returnable transit packaging, convenience shopping, and recycling, many of which are somewhat shielded from local consumer spending trends.
“Our strategy aims to consistently deliver tangible benefits for the business and enhanced returns for our shareholders,” affirmed Strong.
Mpact declared a total dividend of 105c per share.
Mpact share price
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